Supply in Purely Competitive Markets (2 pages)

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Supply in Purely Competitive Markets



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Supply in Purely Competitive Markets

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This lecture is about marginal cost and how firms choose what price they sell at. We learned a lot of equations and how they applied.


Lecture number:
12
Pages:
2
Type:
Lecture Note
School:
The University of Oklahoma
Course:
Econ 1123 - Princ. of Econ-Micro
Edition:
1

Unformatted text preview:

ECON 1123 1st Edition Lecture 12 Outline From Previous Lecture I More on Costs II Looking at the Long run Outline of Current Lecture I Supply in Purely Competitive Markets A The Characteristics of Pure competition B The Purely Competitive firm in short run equilibrium C The competitive firm s marginal revenue schedule D Short Run Profits and Average Total Costs Current Lecture Notes I Supply in Purely Competitive Markets Note This does not exist in reality A The Characteristics of Pure competition In Competitive markets we have large numbers of independently action buyers and sellers So many in fact that no individual buyer or seller can really affect market price Homogeneous Products No real or imagined differences i e it s all asprin Firms can easily enter or exit the industry Perfect information concerning prices and products Perfectly mobile resources B The Purely Competitive firm in short run equilibrium short run some resources are fixed capital but some are variable labor Operational objective of the owners and managers maximize profits or minimize losses rule for profit maximization or loss minimization marginal revenue marginal cost Marginal Revenue is the additional revenue a firm receives when it sells an incremental unit of output MR change in total revenue change in output These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Marginal Cost the additional cost a firm incurs when it produces an incremental unit of output The Rule MR MC If a company can make something for 8 dollars and sell it for 10 for a profit of 2 dollars they will do it If a company can make something for 9 99 and sell it for 10 dollars then they also will do that They will do this until no more profit can be made then they will stop because they want to avoid loss C The competitive firm s marginal revenue schedule Note A firm is a price taker they have to take the price given by the



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