Principles of EconomicsChapter14 Firms in competitive markets

2011/1/30(Sun)

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13The cost of production

Profit=Revenue-Cost=PQC

(PQC)

(

)(1

150 140 130 120 110 100 90 80 70 60 50 40 30 20 10

0 1 2 3 4 5

$80 70 60 50 40 30 20 10

(10 10 20 30 150 130 110 90 70 50 40 140 120 100 80 60

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14Firms in competitive markets

=PQC

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?

?

(market structure)

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(/)

Price taker(Price maker)

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Next Study Chap15Monopoly()() Chap16 Monopolistic Competition()() Chap17 Oligopoly()()Advanced Study()

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Total Revenue=PriceQuantity

(Price Taker)

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()Average RevenueAR=TR/Q=PQ/Q=P

(1)Marginal RevenueMR=TR/Q=PPrice Taker()

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Table1

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??

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Tabel2

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4gallons5gallons7

Ten principles of Economics

Rational people think at the margin.

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-(MC)-(ATC)U-MCATCATC-P(Price Taker)-P=MR=ATRgeneral rule-MRMC,-MRMC,-MR=MC,

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(shutdown)

(Exit)

:()

=PQC

=TR(VCFC) =TR(VCSunk Cost)

Shut down if TR

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MCAVC

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AVC

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Exit if TRTC

TR/QTC/Q

PATC()

Enter if P>ATC

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MCATC

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ProfitTR-RC (TR/QTC/Q)Q (PATC)Q(PATC)()

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()

()

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Profit=(PATC)Q0PATC0P=ATC

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Profit=TRTC0

-TC

-TR

-0

explicit cost()

implicit cost()

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P1P2Q1Q2PATC

Q3C

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(elastic)(horizon)

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Questions for Review

P4 P6 P7 P11 P14,P17 P15,P18 P16 P21,P23 P26 P27

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Disucussion