, - Meaning cannot change product price will have to ADJUST TO IT
4. Easy entry and exit
- Firms can easily enter and existing firms can easily leave the perfect competition
- No obstacles prohibits new firm from selling their outputs in a competitive market
9.3 DEMAND FOR A FIRM IN PERFECT COMPETITION
- Explain how a perfect competitive seller sees demand
Perfectly elastic demand
- The demand schedule faced by INDIVIDUAL
FIRM is purely competitive industry is a
perfectly elastic at the market price
- The demand curve in a perfectly competitive
industry is a horizontal line (perfectly elastic)
because based on the marginal revenue it
stays the same as its demand curve and the
average revenue curve
- Because units are increasing but the market
price is consistent it is a PERFECTLY
ELASTIC DEMAND CURVE = straight line
The individual competitive firm - they are such a
small fraction of industry total output - the market
price is a fixed value and that's why they can sell as
much as they can or as little as they want
AVERAGE, TOTAL AND MARGINAL REVENUE
- The firm's demand schedule is also the average revenue schedule
- If all buyers must pay 131 per unit - that is the revenue per unit or
AVERAGE REVENUE received by the seller
- PRICE AND AVERAGE REVENUE IS THE SAME THING
The total revenue = each sales level is found by multiplying price by corresponding quality the
firm can sell (TR = P x Q)
- Quality demanded x price = total revenue
If firms want to make changes they look at the relationship between marginal revenue and total
revenue - because MARGINAL REVENUE IS THE result of selling one more unit of output
- Marginal revenue stays the same because the PRODUCT PRICE never changes based
on the quality demanded
- Marginal revenue is when you subtract the difference between original total revenue by
new total revenue - that's why in the firm's demand schedule in perfect competition it is
always the same
9.4 PROFIT MAXIMIZATION IN REVENUE IN SHORT RUN (TOTAL REV / TOTAL COST)
- describe how perfectly competitive firms use the total revenue total cost approach to
maximize profits in the short run
4. Easy entry and exit
- Firms can easily enter and existing firms can easily leave the perfect competition
- No obstacles prohibits new firm from selling their outputs in a competitive market
9.3 DEMAND FOR A FIRM IN PERFECT COMPETITION
- Explain how a perfect competitive seller sees demand
Perfectly elastic demand
- The demand schedule faced by INDIVIDUAL
FIRM is purely competitive industry is a
perfectly elastic at the market price
- The demand curve in a perfectly competitive
industry is a horizontal line (perfectly elastic)
because based on the marginal revenue it
stays the same as its demand curve and the
average revenue curve
- Because units are increasing but the market
price is consistent it is a PERFECTLY
ELASTIC DEMAND CURVE = straight line
The individual competitive firm - they are such a
small fraction of industry total output - the market
price is a fixed value and that's why they can sell as
much as they can or as little as they want
AVERAGE, TOTAL AND MARGINAL REVENUE
- The firm's demand schedule is also the average revenue schedule
- If all buyers must pay 131 per unit - that is the revenue per unit or
AVERAGE REVENUE received by the seller
- PRICE AND AVERAGE REVENUE IS THE SAME THING
The total revenue = each sales level is found by multiplying price by corresponding quality the
firm can sell (TR = P x Q)
- Quality demanded x price = total revenue
If firms want to make changes they look at the relationship between marginal revenue and total
revenue - because MARGINAL REVENUE IS THE result of selling one more unit of output
- Marginal revenue stays the same because the PRODUCT PRICE never changes based
on the quality demanded
- Marginal revenue is when you subtract the difference between original total revenue by
new total revenue - that's why in the firm's demand schedule in perfect competition it is
always the same
9.4 PROFIT MAXIMIZATION IN REVENUE IN SHORT RUN (TOTAL REV / TOTAL COST)
- describe how perfectly competitive firms use the total revenue total cost approach to
maximize profits in the short run
