# 8.2 How perfectly competitive firms make output decisions  (Page 3/28)

 Page 3 / 28

The formula for marginal revenue is:

Price Quantity Total Revenue Marginal Revenue
$4 1$4 -
$4 2$8 $4$4 3 $12$4
$4 4$16 $4 Notice that marginal revenue does not change as the firm produces more output. That is because the price is determined by supply and demand and does not change as the farmer produces more (keeping in mind that, due to the relative small size of each firm, increasing their supply has no impact on the total market supply where price is determined). Since a perfectly competitive firm is a price taker, it can sell whatever quantity it wishes at the market-determined price. Marginal cost, the cost per additional unit sold, is calculated by dividing the change in total cost by the change in quantity. The formula for marginal cost is: Ordinarily, marginal cost changes as the firm produces a greater quantity. In the raspberry farm example, shown in [link] , [link] and [link] , marginal cost at first declines as production increases from 10 to 20 to 30 packs of raspberries—which represents the area of increasing marginal returns that is not uncommon at low levels of production. But then marginal costs start to increase, displaying the typical pattern of diminishing marginal returns. If the firm is producing at a quantity where MR>MC, like 40 or 50 packs of raspberries, then it can increase profit by increasing output because the marginal revenue is exceeding the marginal cost. If the firm is producing at a quantity where MC>MR, like 90 or 100 packs, then it can increase profit by reducing output because the reductions in marginal cost will exceed the reductions in marginal revenue. The firm’s profit-maximizing choice of output will occur where MR = MC (or at a choice close to that point). You will notice that what occurs on the production side is exemplified on the cost side. This is referred to as duality. Marginal revenues and marginal costs at the raspberry farm Quantity Total Cost Fixed Cost Variable Cost Marginal Cost Total Revenue Marginal Revenue 0$62 $62 - - - - 10$90 $62$28 $2.80$40 $4.00 20$110 $62$48 $2.00$80 $4.00 30$126 $62$64 $1.60$120 $4.00 40$144 $62$82 $1.80$160 $4.00 50$166 $62$104 $2.20$200 $4.00 60$192 $62$130 $2.60$240 $4.00 70$224 $62$162 $3.20$280 $4.00 80$264 $62$202 $4.00$320 $4.00 90$324 $62$262 $6.00$360 $4.00 100$404 $62$342 $8.00$400 \$4.00

#### Questions & Answers

what is Price mechanism
introduction to economics
welfare definition of economics
Uday
examine the wealth and welfare definitions of economics
Uday
read book by ml jhingan
Anand
What do we mean by Asian tigers
Dm me I will tell u
Shailendra
Hi
Aeesha
hi
Pixel
What is Average revenue
KEMZO
How are u doing
KEMZO
it is so fantastic
metasebia
uday
Uday
it is a group of 4 countries named Singapore, South Korea, Taiwan and Hong Kong because their economies are growing very faster
Anand
what's a demand
it is the quantity of commodities that consumers are willing and able to purchase at particular prices and at a given time
Munanag
quantity of commodities dgat consumers are willing to pat at particular price
Omed
demand depends upon 2 things 1wish to buy 2 have purchasing power of that deserving commodity except any from both can't be said demand.
Bashir
Demand is a various quantity of a commodities that a consumer is willing and able to buy at a particular price within a given period of time. All other things been equal.
Vedzi
State the law of demand
Vedzi
The desire to get something is called demand.
Mahabuba
what is the use of something should pay for its opportunity foregone to indicate?
Why in monopoly does the firm maximize profits when its marginal revenue equals marginal cost
different between economic n history
If it is known that the base change of RM45 million, the statutory proposal ratio of 7 per cent, and the public cash holding ratio of 5 per cent, what is the proposed ratio of bank surplus to generate a total deposit of RM 300 million?
In a single bank system, a bank can create a deposit when it receives a new deposit in cash. If a depositor puts a cash deposit of RM10,000 into the bank, assume the statutory reserve requirement is 7% and the bank adopts a surplus reserve of 8%. a. Calculate the amount of deposits made at the end o
Jeslyne
the part of marginal revenue product curve lies in the _ stage of production is called form demand curve for variable input.
The cost associated with the inputs owned by the farmer is termed as
Bashir
the cost associated with inputs owned by the farmer is termed as ____
Bashir
why do we study economic
we study economics to know how to manage our limited resources
Eben
တစ်ဦးကျဝင်​ငွေ
myo
we study economics the know how to use our resources and where to put it
Mamoud
what is end
Nwobodo
we study economics to make rational decision
Gloria
we study economics only to know how to effectively and efficiently allocate our limited resource in other to meet our unlimited wants
Kpegba
We study economics inorder for us to know the difference of the needs and wants and aslo how to use the limited resources that are available
Bongani
who is the father of economy
ibrahim
Somnath
professor Lionel Robins
Abraham
albert
mariginal utility is finalized by who?
Barsharani
marshall
Laila
Mamoud
Bongani
Veronica
adam smith barter system
Omed
why we study economics
what is equilibrium price?
This is the price In which quantity demanded is equal to the quantity supplied.
Binta
what is the principle of demand
Udoh
is when the price of two item is equal
Mamoud
is the market price at which the demand curve and supply curve of particular commodity interest.
Kpegba
can we say that without macroeconomics,microeconomics can succeed? and why?
Kpegba
equilibrium price is when prices are equal
Ramon
equilibrium price is a point at which demand and supply curve meet
Vedzi
please can you give us the correct answer after the lesson to be compared to our answers
in what?
ibrahim
why economics is the real life subject
Kitojo
because it is subjected to human decisions
Kpegba
why might an increase in money national income not necssarily lead to an increase in the standards of living
Multin
pls,who is a legal tender.can you explain well
We think, that the legal tender is a form of payment of a debt or anything related, but which is not necessarily money. that can be bank notes, or coins for instance. but the bottom line is the legal tender is required to be recognized by the law, but it varies according to the jurisdiction.
Pierre
Thanks
Mary
Is it something like cheque
Mary
legal tender is anything that can be accepted for payment within a country
Tyson
good
Philo
is Something legally accepted in a particular place
Mamoud