Q:
When is D=MR and S=MC, and when are they different? Is it only in the competitive price-taker situation when they are equivalent?
A:
Supply is a truncated version of the marginal cost curve (above the shut-down condition) in a COMPETITIVE market. Demand equals marginal revenue when demand is perfectly elastic (i.e. horizontal). So the answer to your second question would be yes, unless for some bizarre reason market demand were randomly perfectly elastic.
About Me
- Economists Do It With Models
- I am a Ph.D. student in Business Economics at Harvard University. My research is on behavioral economics, incentives and consumer behavior. I also spend my academic year working for Ec10, which is the introductory undergraduate economics course at Harvard. Outside of school, I like cooking, going to the driving range and playing with my dog Gizmo. For more information, see www.economistsdoitwithmodels.com.
No comments:
Post a Comment