The Theory of Imperfect Competition Assume that the demand curve the firm faces is a straight lin Ine =A-BXP (6-1) Then the Mr that the firm faces is given by MR=P-O/B Average and Marginal Costs Average Cost(AC) is total cost divided by output Marginal Cost(MO) is the amount it costs the firm to produce one extra unit Copyright C 2003 Pearson Education, Inc Slide 6-12Copyright © 2003 Pearson Education, Inc. Slide 6-12 – Assume that the demand curve the firm faces is a straight line: Q = A – B x P (6-1) – Then the MR that the firm faces is given by: MR = P – Q/B (6-2) • Average and Marginal Costs – Average Cost (AC) is total cost divided by output. – Marginal Cost (MC) is the amount it costs the firm to produce one extra unit. The Theory of Imperfect Competition