Log in
HomeClass Notes1,200,000CA670,000

ECON 3411 Lecture Notes - Lecture 35: Perfect Competition, Marginal Cost, Takers

10 views4 pages
School
York University
Department
Economics
Course
ECON 3411
Professor
Ying Kong

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Topic: firm"s short-run supply: a profit-maximizing firm should continue to operate (sustain short-run losses) if its operating loss is less than its fixed costs. Operating results in a smaller loss than ceasing operations: decision rule: A firm should shut down when p < min avc. Co(cid:374)ti(cid:374)ue operati(cid:374)g as lo(cid:374)g as p (cid:373)i(cid:374) avc. Firm"s short-run supply curve: mc above min avc. Fir(cid:373)"s hort-run supply curve: the short-run supply curve for a perfectly competitive firm is its marginal cost curve above the minimum point on the curve. The (cid:373)arket supply curve is the su(cid:373)(cid:373)atio(cid:374) of each i(cid:374)dividual fir(cid:373)"s supply at each price. P firm 1 p firm 2 p market. 10 15 q 20 25 q 30 40 q. If firms are price takers but there are barriers to entry, profits will persist. If the industry is perfectly competitive, firms are not only price takers but there is free entry.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related Documents

ECON 3411 Lecture Notes - Lecture 39: Monopolistic Competition, Marginal Revenue, Market Power
magentasardine691
ECON 3411 Lecture Notes - Lecture 40: Market Power, Monopolistic Competition, Decision Rule
magentasardine691
ECON 1B03 Lecture Notes - Lecture 7: Market Power, Perfect Competition, Marginal Revenue
emeraldcod961

Related Questions

Your firm is one of 100 identical firms operating in the short run in a perfectly competitive market. Your total cost function (short run and long run) is C = 800 + 25 q + 0.5 q2, and your marginal cost function is MC = 25 + q. The (short run and long run) market demand curve is given by Q = 2,750 – 5P. a.Find the supply curve for your firm. Show work. Then, find the short-run market supply curve. Show work. b.Find equilibrium price, P*, and quantity, Q*, in the market in the short run.Show work. c.Find the lowest price at which your firm will not exit the market in the long run.Show work. Referring to your answer in part b, should your firm exit the market in the long run if P* in the market does not increase over time?Explain. d.If you choose not to exit, how many firms (including your own) do you expect to be in the market in the long run?Show work, and explain.

10-When marginal cost is greater than average total cost,
A. Average total cost must be increasing with output
B. Average variable cost must be decreasing with output
C. Average fixed cost must be increasing with output
D. Marginal cost must be increasing with output

11-If a firm's demand curve falls below its AVC curve, then the firm should
A. Shut down now
B. Operate in the short run but not the long run
C. Set price = marginal cost
D. Shutdown in the long-run

12- The demand curve facing a perfectly competitive firm is
A. Upward sloping
B. Perfectly inelastic
C. Downward sloping
D. Perfectly elastic

13-If the demand curve falls below the ATC curve but lies above AVC, then the firm should
A. Should shut down
B. Operate in the short run but not the long run
C. Set price = marginal cost
D. Operate in the short run and the long run

14-At the output where MC = ATC = P, the perfectly competitive firm
A. Should shutdown
B. Has no economic profit
C. Is not profit maximizing
D. Should raise output

Your firm is one of 100 identical firms operating in the short-run in a perfectly competitive market. Your total cost function (short-run and long-run) is C = 500 + 20 q + q2, and your marginal cost function is MC = 20 + 2q. The (short-run and long-run) market demand curve is given by Q = 4,500 - 5P.

a. Find the supply curve for your firm. Then, find the short-run market supply curve. Show work.

b. Find equilibrium price, P*, and quantity, Q*, in the market in the short-run. Show work.

c. Find your firm's total revenue, total cost, and profit in the short-run. Show work.

d. Find the minimum efficient scale (MES) for your firm. Show work. Find the long-run equilibrium price in the market after entry or exit has occurred. Show work.