ECON-101 Lecture Notes - Lecture 14: Taipei Metro, Graph Labeling, Marginal Revenue

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goldscorpion22

11 Mar 2016

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Examine how compeiive irms decide how much output to produce. Examine how compeiive irms decide when to shut down producion temporarily. Examine how compeiive irms decide whether to exit or enter a market. See how irm behaviour determines a market"s short-run and long-run supply curves. Compeiive market (perfect compeiion): a market in which there are many buyers and many sellers so that each has a negligible impact on the market price. Relaionship between price, average revenue, marginal revenue and demand curve: Price = ar = mr = demand curve. Average revenue: total revenue divided by quanity sold. Marginal revenue: the change in total revenue from addiional revenue sold. = p x q atc x q. By producing (q) where marginal revenue = marginal cost (mr =mc) When mr>mc, the irm should expand producion. When mc>mr, the irm should reduce or cut down producion. Proit will be maximized when mr=mc (rule for proit maximizaion)

Related Questions

Which of the following is not a characteristic of a perfectly competitive market?

(i) Each firm is a price taker.

(ii) There are many buyers and sellers in the market.

(iii) The products sold by the firms in the market are homogeneous.

(iv) It is difficult for a firm to enter or leave the market.

ivoryyellowjacket253

Which of the following is NOT a characteristic of a perfectly competitive market?

Select one:

a. It is difficult for a firm to enter or leave the market.

b. Each firm is a price taker.

c. There are many buyers and sellers in the market.

d. The products sold by the firms in the market are homogeneous.

azureantelope164

1. Characteristics of competitive markets

The model of competitive markets relies on these three core assumptions:

1.	There must be many buyers and sellers a few players can't dominate the market.
2.	Firms must produce identical products buyers must regard all sellers' products as equivalent.
3.	Firms and resources must be fully mobile, allowing free entry into and exit from the industry.

The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry.

Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not.

Scenario	Competitive?
The government has granted the U.S. Postal Service the exclusive right to deliver mail.	________________
Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the style of that particular store. Additionally, some makers use higher-quality cotton than others, which is reflected in the apparel's prices.
Two taxi companies serve most of the market in a big city. Consumers don't care about which taxi company they take if they decide it's worth taking a taxi, they flag down the nearest one.	_________________
There are dozens of pasta producers that sell pasta to hundreds of Italian restaurants nationwide. The restaurant owners buy from the cheapest pasta producer available to

copperhamster111

ECON-101 Lecture Notes - Lecture 14: Taipei Metro, Graph Labeling, Marginal Revenue

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