TAILIEUCHUNG - Lecture Business economics - Lecture 10: Firms in Competitive Markets

In this chapter we examine the behavior of competitive firms, such as your local gas station. After completing this chapter, students will be able to learn what characteristics make a market competitive, examine how competitive firms decide how much output to produce, examine how competitive firms decide when to shut down production temporarily,. | Review of the previous lecture Because a competitive firm is a price taker, its revenue is proportional to the amount of output it produces. The price of the good equals both the firm’s average revenue and its marginal revenue. To maximize profit, a firm chooses the quantity of output such that marginal revenue equals marginal cost. This is also the quantity at which price equals marginal cost. Therefore, the firm’s marginal cost curve is its supply curve. In the short run, when a firm cannot recover its fixed costs, the firm will choose to shut down temporarily if the price of the good is less than average variable cost. Review of the previous lecture In the long run, when the firm can recover both fixed and variable costs, it will choose to exit if the price is less than average total cost. In a market with free entry and exit, profits are driven to zero in the long run and all firms produce at the efficient scale. Changes in demand have different effects over different time .

• Kinh tế học
• Business economics
• Lecture Business economics
• Business applications of economics
• Open economy
• Competitive markets
• Competitive firms
• Economic Models
• Principles of economics
• Economics of agriculture
• Monopolistic competition
• Macroeconomic policy
• Supply curve
• Elasticity of demand
• Consumer choice
• Imperfect competition
• Gross domestic product
• Financial intermediaries
• Productivity growth
• Natural rate of unemployment
• Labor force
• Money supply