Lesson 9 Flashcards
What is profit?
Difference between total revenue and total cost, π(q) = R(q) – TC (q)
What is revenue?
Price multiplied by quantity, Revenue=P*q
What is price competition?
A competition between firms to with the goal of maximizing profits.
What are price takers?
When firms take the market price as given and make their selling decisions accordingly.
What are the conditions of Price Taking Firms?
Firms are more Likely to bo price takers when: there are many sellers, There is product homogeneity, There is free entry and exit.
What is marginal Revenue?
The change in revenue resulting from a one-unit increase in output.
what is Price equal to?
Price= Marginal Revenue
When is Profit greatest?
Profit is greatest at the quantity where MR=MC.
What are the Profit Maximization Steps?
- find MR by taking the derivative of revenue with respect to quantity.
- Find MC by taking the derivative of total Cost with respect to quantity.
- Set ME=MC
- Solve for q.
How do you find Marginal Cost? (MC)
Take the derive of Total Cost (TC).
What is the rectangular formed by quantity and the height of ATC at that quantity?
Total Cost
