ECN 104 Lecture Notes - Lecture 10: Monopolistic Competition, Marginal Revenue, Market Power
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T. r = price * quantity = p * q. A. r = t. r / q = (p*q) / q = price. M. r = change in t. r / change in quantity = price. Perfectly competitive firm can max profit only by adjusting output. Total profit = total revenues total costs. Per unit profit = total profit / quantity. Firms short run supply curve is the portion of its mc curve above minimum avc. Technology increase marginal cost decreases supply increase. A wage increase shifts the supply curve to the left (decreasing supply) Wages increase marginal cost increase supply decrease. Technological process would shift the supply curve to the right. Supply curve shifts due to changes in marginal cost: Industry supply : summation of all the firms short run supply curves (mc) Over the long run, p = minimum atc. All firms will be similarly affected: firms seek profit and avoid losses, firms are free to