PHI 1101 Chapter 14: Firms in Competitive Markets

• School: University of Ottawa
• Department: Philosophy
• Course: PHI 1101
• Professor: Laura Byrne

Document Summary

3 characteristics of a competitive market/perfectly competitive market. There are many buyers and sellers in the market price takers. The goods offered by the various sellers are very much the same. Firms can freely enter or exit the market (firms don"t have to be price takers) Powerful force in shaping long run equilibrium. Firms in competitive markets aim to maximize revenue. Since firms are price takers, it doesn"t matter how much output they produce, price will be constant. Total revenue is proportional to the amount of output. Average tells us how much revenue a firm receives per unit sold. For all firms, average revenue equals the price of the good. For all firms marginal revenue equals the price of the good, in competitive firms. Tells us the change in total revenue from the sale of an additional unit (cid:1867)(cid:1872) (cid:1844)(cid:1874)(cid:1866)(cid:1873)=(cid:1842) (cid:1843)(cid:1873)(cid:1866)(cid:1872)(cid:1872) (cid:1874) (cid:1844)(cid:1874)(cid:1866)(cid:1873)=(cid:1867)(cid:1872) (cid:1844)(cid:1874)(cid:1866)(cid:1873) (cid:1843)(cid:1873)(cid:1866)(cid:1872)(cid:1872) (cid:1844)=(cid:3017) (cid:3018)(cid:3018) = p (cid:1866) (cid:1844)(cid:1874)(cid:1866)(cid:1873)=(cid:1867)(cid:1872) (cid:1844)(cid:1874)(cid:1866)(cid:1873) (cid:1843)(cid:1873)(cid:1866)(cid:1872)(cid:1872) Mr > mc, increase in milk production.