ch.3

when you're operating in a perfectly competitive market, your best strategy is to charge a price that is pretty much identical to whatever your _______________ are charging

competitors are charging

the market supply curve is which way sloping?

curve is upward sloping

a second reason why your marginal costs might rise as you increase production

the cost of your inputs might rise

marginal product

the extra output you get from an additional unit of input, like hiring one more worker, is called the .....

market supply

the sum of the quantity supplies by each seller

fixed costs

these costs don't vary when you change the quantity of output you produce, like land

variable costs

these costs, like labor and raw materials, vary with the quantity of output you produce

prices of related outputs, substitutes-in-production

when the price increase of one good (like diesel) decreases your supply of another (like gasoline), we call them....

individual supply curve

a graph of the quantity that a business plans to sell at each price

to maximize your profits, keep applying the rational rule for sellers, continuing to produce until:

price=marginal cost

profit

revenues - costs

rational rule for sellers in competitive markets

sell one more item if the price is greater than (or equal to) the marginal cost

price-taker, example: perfectly competitive firms

someone who decides to charge the prevailing price and whose actions do not affect the prevailing price

productivity and technology

supply curve towards the right when there's more efficient production technology

law of supply

supply curves are upward sloping

supply shifter four: expectations

supply is greater (more right) when next year's price is expected to be lower

marginal principle

"how many" gallons of gas should I supply?

cost-benefit principle

"should" I sell one more gallon?

two reasons that a higher price leads to a larger quantity supplied to the market

1. a higher price leads individual businesses to supply a larger quantity 2.a higher price means more businesses are supplying their goods and services; a lower price means fewer businesses are doing so.

the rational rule for sellers is important for two reasons

1. provides useful advice to you 2. if you need to forecast the supply decisions of a savvy manager

perfect competition

1.) all firms in the market are selling an identical good 2.) there are many sellers and many buyers

opportunity cost principle

calculate marginal cost that includes variable costs, but not fixed costs

input prices

can supply more (supply curve more right) with more

complements-in-production

goods that are made together. your supply of a good will increase if the price of a complement-in-production rises

five factors that shift the supply curve

input prices productivity and technology prices of related outputs expectations the type and number of sellers

why is the market supply curve so useful to managers?

it summarizes the behavior of their competitors

price=

marginal cost

supply shifter five: the type and number of sellers

market supply with a large number of sellers is more to the right

diminishing marginal product

occurs when the marginal product of an input declines as you use more of it