Economics 7

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  • Created by: Gabrielle
  • Created on: 29-12-13 18:04
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  • Firms in Markets
    • Types of Goods
      • Excludable
        • A person can be prevented from using it when they do not pay for it
      • Rival
        • One person’s use diminishes other people’s use
      • Private
        • Goods that are both excludable and rival
          • e.g. ice cream, congested toll roads
      • Public
        • Neither excludable nor rival
          • E.g. National defence, flood controls
      • Common Resources
        • Rival but not excludable
          • E.g.Fish in the ocean, the environment
    • Public and Private Sector
      • Public
        • Financed and controlled by the government
        • Merit goods
          • Market provision would not lead to an optimal production e.g. healthcare & education
      • Private
        • Business is owned, financed and run by private individuals
    • Profit Maximisation
      • Average revenue is the total revenue divided by the amount sold
      • Marginal revenue is the change in total revenue from the sale of each additional unit of output
      • The marginal cost is the change in total costs from the production of each additional unit
      • A firm will maximize profits at an output where MR = MC
    • Break Even
      • Assumes all items are sold
      • Price changes affect demand
      • Revenue maximisation
      • Cost minimisation

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