Changes

When there is perfect competition in the sale of a good or service, then the equilibrium is when the marginal revenue to the seller (the extra dollar that he charges and receives as revenue) equals his marginal cost in producing the good (the extra dollar he paid to produce the good).  At that point the seller's marginal profit (the extra dollar that he can keep after paying his costs) has fallen to zero and he has no incentive to produce any more goods.  In other words, the supplier keeps producing more and more goods only until his marginal profit on each extra good falls to zero such that he does not make any more money by selling additional quantity.  The seller does not want his marginal revenue to fall below his marginal cost, because then he is losing money.

When there is perfect competition in the sale of a good or service, then the equilibrium is when the marginal revenue to the seller (the extra dollar that he charges and receives as revenue) equals his marginal cost in producing the good (the extra dollar he paid to produce the good).  At that point the seller's marginal profit (the extra dollar that he can keep after paying his costs) has fallen to zero and he has no incentive to produce any more goods.  In other words, the supplier keeps producing more and more goods only until his marginal profit on each extra good falls to zero such that he does not make any more money by selling additional quantity.  The seller does not want his marginal revenue to fall below his marginal cost, because then he is losing money.

This is illustrated as follows.  How long does the owner of a store keep it open at night?  As long as customers are paying him more money (marginal revenue) than it costs him to keep the store open (marginal costs).  As soon as the owner realizes that he is paying more to his workers to keep the store open than he is getting from customers, he closes his store for the night.  After a few weeks of this, the owner realizes that he makes money before a certain hour (perhaps 9pm), and loses money afterward.  Then he puts a sign on his door telling everyone that he closes at 9pm every night.  Marginal revenue exceeds marginal cost before 9pm for him (and he makes a marginal profit by staying open), while marginal costs exceed marginal revenue after 9pm (so he avoids losing money by closing).

Here is an example.  How long does the owner of a store keep it open at night?  As long as the flow of customers into his store pays him more money (marginal revenue) than it costs him to keep the store open (marginal costs).  As it gets later at night, the flow of customers declines, the owner makes less, and eventually his costs of keeping the store open will exceed the money that is being paid to him by customers.  As soon as the owner realizes that he is paying more to his workers to keep the store open than he is getting from customers, he closes his store for the night.  After a few weeks of this, the owner realizes that he usually makes money before a certain hour (perhaps 9pm), and loses money afterward.  Then he puts a sign on his door telling everyone that he closes at 9pm every night.  Marginal revenue exceeds marginal cost before 9pm for him (so he makes a marginal profit by staying open), while marginal costs exceed marginal revenue after 9pm (so he avoids losing money by closing).

==Discussion: Health Care==

==Discussion: Health Care==