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PERFECT COMPETITION, SHORT-RUN PRODUCTION ANALYSIS: A perfectly competitive firm produces the profit-maximizing quantity of output that equates marginal revenue and marginal cost. This production level can be identified using total revenue and cost, marginal revenue and cost, or profit. Because a perfectly competitive firm faces a perfectly elastic demand curve, it efficiently allocates resources by equating price and marginal cost. In addition, the marginal cost curve above the average variable cost curve is the perfectly competitive firm's short-run supply curve.
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Lesson 10: Utility and Demand | Unit 5: Beyond Demand
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Page: 18 of 21
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- As consumers we are concerned with all sorts of decisions.
- Consumer demand theory, utility, and the law of diminishing marginal utility play a key part in these decisions.
- Consumer demand theory also helps explain why you might...
- Watch Gilligan's Island rather than Star Trek.
- Watch Gilligan's Island rather than reading a book.
- Hang out with friends watching Gilligan's Island the night before an exam rather than studying.
- Vote in major Presidential elections but not in local referendums.
- Steal hundreds of dollars of office supplies from your work over a period of years.
- Stop on a highway to help a complete stranger fix a flat tire.
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TOTAL VARIABLE COST AND MARGINAL COST A mathematical connection between marginal cost and total variable cost stating that marginal cost IS the slope of the total variable cost curve. This relation between total variable cost and marginal cost is also seen with total cost. The slope of the total cost curve is marginal cost, as well. The relation between total variable cost and marginal cost is but another in the long line of applications of the total-marginal relation.
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Okun's Law posits that the unemployment rate increases by 1% for every 2% gap between real GDP and full-employment real GDP.
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"Sometimes when you innovate, you make mistakes. It is best to admit them quickly and get on with improving your other innovations. " -- Steve Jobs, Apple Computer founder
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ITO
International Trade Organization
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