No matter how many or how few radishes it produces, the firm expects to sell them all at the market price. In the market for radishes, the equilibrium price is $0.40 per pound 10 million pounds per month are produced and purchased at this price.īecause it is a price taker, each firm in the radish industry assumes it can sell all the radishes it wants at a price of $0.40 per pound. Price and output in a competitive market are determined by demand and supply. This fact has an important implication: over a wide range of output, the firm’s marginal cost curve is its supply curve. ![]() We shall see that the firm can maximize economic profit by applying the marginal decision rule and increasing output up to the point at which the marginal benefit of an additional unit of output is just equal to the marginal cost. Our goal in this section is to see how a firm in a perfectly competitive market determines its output level in the short run-a planning period in which at least one factor of production is fixed in quantity. ![]() ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |