Authors libby rittenberg 475

Because 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 No matter how many or how few radishes it produces, the firm expects to sell them all at the market price The assumption that the firm expects to sell all the radishes it wants at the market price is crucial If a firm did not expect to sell all of its radishes at the market price—if it had to lower the price to sell some quantities—the firm would not be a price taker And price-taking behavior is central to the model of perfect competition Radish growers—and perfectly competitive firms in general—have no reason to charge a price lower than the market price Because buyers have complete information and because we assume each firm’s product is identical to that of its rivals, firms are unable to charge a price higher than the market price For perfectly competitive firms, the price is very much like the weather: they may complain about it, but in perfect competition there is nothing any of them can about it Total Revenue While a firm in a perfectly competitive market has no influence over its price, it does determine the output it will produce In selecting the quantity of that output, one important consideration is the revenue the firm will gain by producing it A firm’s total revenue is found by multiplying its output by the price at which it sells that output For a perfectly competitive firm, total revenue (TR) is the market price (P) times the quantity the firm produces (Q), or Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 475