Chp 14

Chapter 14 examines the behavior of Competitive firms, which is a market where there are many buyers and sellers and the goods offered by the various sellers are largely the same; which means that buyers/sellers have a small influence on price.  A third characteristic being that Firms can freely enter or exit a market. In a typical firm the total revenue is proportional to the amount of output. Average Revenue is simply total revenue divided by the quantity sold. The Average Revenue is used to tell us how much a firm receives for a typical unit sold (aka the price of the good). Tbh Mr. Waller I'm just typing random definitions and sentences that are italized. But I mean that illustrates the point of this chapter, right? Along with Average Revenue is also Marginal revenue which is the change in total revenue from an additional unit sold and is *gasp* equal to the price of the good. When trying to maximize profit is the marginal revenue is greater than the marginal cost  then production should increase, if it marginal revenue is less than the marginal cost then production should decrease. This would be an example of thinking at the margin. By making incremental adjustments to the level of production then firms are naturally led to produce the profit-maximizing quantity. The firm maximizes profit by producing the quantity at which marginal cost equals marginal revenue. When looking at the graphs of all these curves, because the firm's marginal cost curve determines the quantity of the good the firm is willing to supply at any price, the marginal cost curve is also the competitive firm's supply curve. When it comes to stopping production a shortdown refers to not producing anything during a specific period of time whereas an Exit refers to leaving the market for a long period of time.