Perfect competition in the short run
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- Perfect Competition in the Short Run Overview:
- Short-Run Market Supply Curve
- Quantities supplied by all firms
- Profit maximized supply curve for each firm
- Vertical, Horizontal, & Curves Up
- Every firm has the same output
- Short-Run: Equilibrium, & Market Demand Changes
- Demand curve is a downward sloping line
- Intersection of Demand & Supply → equilibrium
- Increase in Demand → Output Market Price
- Decrease in Demand → Output Market Price
- Short Run: Economic Profit & Loss
- Case 1: Break-even (p = ATC)
- Case 2: Economic Profit (p > ATC)
- Case 3: Economic Loss (p < ATC)
- Understanding Market Changes
Suppose you have the following information for the costs of 1 firm. There are a total of 1000 firms.
You also have information about the market demand
Quantity Demanded (in thousands)
- In the short run, if the market demand _____________, then both the market equilibrium price & quantity will ____________.
- Increase, Increase
- Decrease, Decrease
- Both a and b
- Increase, Decrease
- Decrease, Increase
- Both d and e
- Understanding Economic Profit and Loss
Which of the following graphs shows an economic profit? Calculate the economic profit.
- Use a graph to explain why a firm may incur economic loss in the short run if the average total curve is increased.