Perfect competition firm's output decisions
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Intros
Lessons
- Firm's Output Decisions Overview:
- Total Revenue & Total Cost Curves
- 2 ways for markets to maximize profit
- Low output level → economic loss
- High output level → economic loss
- Intermediate output level → economic profits
- Find the output with the biggest gap
- MC = MR
- Profit maximized when MC = MR
- MR > MC, economic profit when output
- MR < MC, economic profit when output
- MR = MC, economic profit when output or
- A Firm's Decision to Shutdown
- Calculating Economic Loss
- Shutdown → Firm must cover TFC
- Open → Firm must cover TFC & TVC
- Open when AVC < p, Close when AVC > p
- Shutdown Point when AVC = p
- Firm's Supply Curve
- Market price varies, MR varies
- How much output firms make when price varies
Examples
Lessons
- Maximizing Economic Profit, Analyzing Firm Operation, & Graphing Firm Supply Curves
Use the following table to answer the questions
Output
Total Cost
0
5
1
10
2
13
3
18
4
25
5
34
- Use the following table to answer the questions
Output
Total Cost
0
5
1
10
2
13
3
18
4
25
5
34
- Consider the following graph
Find the profit-maximizing output & economic profit when the market price is: - Consider the following graph
Graph the firm's supply curve.