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PURE COMPETITION IN THE SHORT RUN, Large number of firms, Bread, Price…
PURE COMPETITION IN THE SHORT RUN
4 Market Models
Pure Competition Characteristics
Standardized Product
Price takers
Very large numbers of firms
Free entry & exit
Demand - Viewpoint of purely competitive seller
Perfectly Elastic Demand
Average, Total, Marginal Revenue
Average Revenue : Average price per unit
Total Revenue : Price x Qty
Marginal Revenue : Change in total revenue / Change in qty sold
Profit Maximization in the Short Run
Total Revenue Total Cost Approach
If so, in what amount?
What economic profit / (loss) will we realize?
Should we produce this product?
Marginal Revenue Marginal Cost Approach
Profit Maximizing Rule : MR = MC
