firm is in equilibrium when the marginal cost of the factor it hires is: greater than MRP equal to MRP greater than ARP equal to ARP firm is in equilibrium when the marginal cost of the factor it hires is: greater than MRP equal to MRP greater than ARP equal to ARP
Added by Christina R.
Close
Step 1
Step 1: In order to determine when a firm is in equilibrium, we need to understand the relationship between marginal cost (MC), marginal revenue product (MRP), and average revenue product (ARP). Show more…
Show all steps
Your feedback will help us improve your experience
Srikar Katta and 55 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
A firm's marginal cost curve above the averable cost curve is equal to the firm's individual supply curve. This means that every time a firm receive a price from the market it will be willing to supply the amount of output where the price equals marginal cost. What happens to the firm's individual supply curve if marginal costs increase?
A firm's marginal cost curve above the average variable cost curve is equal to the firm's individual supply curve. This means that every time a firm receives a price from the market it will be willing to supply the amount of output where the price equals marginal cost. What happens to the firm's individual supply curve if marginal costs increase?
In a bertrand model with asymmetric information. Firm 1 has marginal cost c1 lower than firm 2 with marginal cost c2. The book says that the most natural equlibrium will be that firm one sets price = c2 and capture all marked. Thats cool. But the book also says that any price between c1 and c2 is an equilibrium. Why so? If firm 1 sets a price higher than c1 but much lower than c2 will it not be a better response to set it closer to c2 and still have the whole marked with a higher profit? And then it cannot be an equilibrium right ? Im confused
Anand J.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD