ECO 461 Lecture Notes - Lecture 4: Consumer Spending, Root Mean Square, Perfect Competition
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1 single product cost functions: total cost = c(q, fixed cost = f, sunk cost = s, average cost = c(q) q, marginal cost = c (q) Let d = 1, then consumer expenditures, e = p q, are constant. Let n = the number of rms, so that q = n qi. The lerner index measures mark-up which should decrease as n increases. N for some a, > 0. If a rm operates for only one period, then all xed costs are sunk. In order to break even in perfect competition, it must be the case that. But, we already know that (p m c) qi = f. F = (p m c) qi. So if we solve the above equation for the number of rms, n , we get the following result: The derivative of the ray average cost is d rac dq q [ 1 mc1 + 2 mc2] c( ) q2.
