Firm Behaviour and Supply Flashcards
In a competitive market, any indi- vidual firm will be a
price-taker; this means that the firm cannot influence the market price but instead **has to decide how much to produce and sell at the given market price of the goods. **
a competitive market is where
no firm has the power to affect the market price of a good.
describe decreasing marginal product of labor, or diminishing returns to labor.
As more workers are employed, production increases (due to specialisation)
But marginal product of labour declines as more workers are hired because the land, plant and machinery the workers have to work with are fixed.
what is marginal cost
the change in total costs (variable + fixed) due to a one-unitchange in quantity produced.
Marginal cost increases as more is produced
because of diminishing returns to labor.
graphical representation of total costs
marginal revenue
the change in total revenue due to a one-unit increase in quantity sold
what is sunk cost?
cost that cannot be avoided, or once made, cannot be recovered
fixed costs in production decisions
for price taking firm
how to calculate producer surplus?
show producer surplus
