In (a)the demand curve facing the firm is perfectly elastic, even though the market demand curve in (b)is downward sloping. The demand curve facing an individual firm in a competitive market is both its average revenue curve and its marginal revenue curve.Along the demand curve,marginal Revenue, average revenue,and price are all equal
In (a) the demand curve facing the firm is perfectly elastic, even though the market demand curve in (b) is downward sloping. The demand curve facing an individual firm in a competitive market is both its average revenue curve and its marginal revenue curve. Along the demand curve, marginal Revenue, average revenue, and price are all equal
Because the demand curve facing a competitive firm is horizontal, so that MR=P.A perfectly competitive firm should choose its output so that marginal cost equals price. MC(q)=MR=P
Because the demand curve facing a competitive firm is horizontal, so that MR =P. A perfectly competitive firm should choose its output so that marginal cost equals price. MC(q) = MR = P
8.4 Choosing Output in the Short Run MC Price (dollars per unit)） 50 Lost profit for Lost profit for 92>q D 91<9 40 AR=MR=P ATC AVC 30 20 10 2 3 5 10 11 90 Output A Competitive Firm Making a Positive Profit
8.4 Choosing Output in the Short Run A Competitive Firm Making a Positive Profit
In the short run,the competitive firm maximizes its profit by choosing an output q*at which its marginal cost MC is equal to the price P(or marginal revenue MR)of its product. The profit of the firm is measured by the rectangle ABCD
In the short run, the competitive firm maximizes its profit by choosing an output q* at which its marginal cost MC is equal to the price P (or marginal revenue MR) of its product. The profit of the firm is measured by the rectangle ABCD
Any lower output qi,or higher output q2,will lead to lower profit. Output Rule:if a firm is producing any output at all, it should produce at the level at which marginal revenue equals marginal cost
Any lower output q1 , or higher output q2 , will lead to lower profit. Output Rule: if a firm is producing any output at all, it should produce at the level at which marginal revenue equals marginal cost