Abstract
This chapter covers the following topics:
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how profit-maximizing firms behave in competitive markets (behavioral foundation of the supply function),
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how the supply function is related to marginal and average cost functions and what this says about the informational demands and effective organization of firms,
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the technological prerequisites for the functioning of competitive markets, and
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how competition drives profits to zero and why this is not bad.
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References
Friedman, M. (1970). The social responsibility of business is to increase its profits. The New York Times Magazine, 122–126. https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html.
Pope Benedict XVI (2009). Caritas in veritate. Dublin: Veritas Publications.
Smith, A. (1776/1991). An inquiry into the nature and causes of the wealth of nations. Everyman’s Library.
Further Reading
Mas-Colell, A., Whinston, M. D., & Green, J. R. (1995). Microeconomic theory. Oxford: Oxford University Press.
Varian, H. R. (1992). Microeconomic analysis. Mountain View: Norton.
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Kolmar, M. (2022). Firm Behavior Under Perfect Competition. In: Principles of Microeconomics. Classroom Companion: Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-78167-5_13
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DOI: https://doi.org/10.1007/978-3-030-78167-5_13
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