EC260 Final: EC260 Final Exam Review
Document Summary
Chapter 8 managing in competitive, monopolistic, and monopolistically competitive markets. In the short-run, firms may earn profits or losses. Entry and exit forces long-run profits to zero. We call a market in which all these conditions hold a perfectly competitive market. Many markets do no exhibit all characteristics of perfect competition competition markets in which firms are price takers even though the market does not fully possess all the characteristics of perfect competition. Residual demand curve the market demand that is not met by other sellers at any given price. Economic profit revenue minus economic cost: = r c if profit is negative, < 0, the firm makes a loss economic cost includes both explicit and implicit costs. Output rule 1: the firm sets its output where its profit is maximized. Output rule 2: a firm sets its output where its marginal profit is zero.
