Microeconomics - The Shut-Down Price-The minimum average...

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Microeconomics – Module 28 Interpreting Perfect Competition Graphs Total profit can be expressed in terms of profit per unit. Profit = TR – TC = (TR/Q –TC/Q) *Q = (P-ATC)*Q - The break-even price of a price-taking firm is the market price at which it earns zero profits. - Whenever market price exceeds minimum average total cost, the producer is profitable. - Whenever the market price equals minimum average total cost, the producer breaks even. - Whenever price is less than minimum average total cost, the producer is unprofitable. Two Cases to Consider: - When the market price is below the minimum average variable cost. - When the market price is greater than or equal to the minimum average variable cost.
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Unformatted text preview: The Shut-Down Price-The minimum average variable cost determines the shut-down price.-When price is greater than minimum average variable cost, the frm should produce in the short run. -The short-run individual supply curve shows how an individual frm’s proft-maximizing level oF output depends on the market price, taking Foxed cost as a given. Changing Fixed Cost-In the long run, frms can acquire or get rid oF fxed inputs.-In most perFectly competitive industries the set oF frms changes in the long run as frms enter and exit the industry.-Exit and entry lead to an important distinction between the short-run supply curve and the long-run supply curve....
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