chap10 - Chapter 10: Perfect competition Perfectly...

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    Chapter 10: Perfect competition
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    Perfectly competitive market many buyers and sellers, identical (also known as homogeneous)  products, no barriers to either entry or exit, and buyers and sellers have perfect  information.
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    Demand curve facing a single firm no individual firm can affect the market price demand curve facing each firm is perfectly  elastic
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    Profit maximization produce where MR = MC
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    P = MR
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    Profit-maximizing level of output
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    Economic Profits > 0 Economic profit
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    Loss minimization and the  shut-down rule Suppose that P < ATC. Since the firm is  experiencing a loss, should it shut down? Loss if shut down = fixed costs Shut down in the short run only if the loss that  occurs where MR = MC exceeds the loss that  would occur if the firm shuts down (= fixed  cost) Stay in business if TR > VC. This implies that  P > AVC. Shut down if P < AVC.
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    Economic loss (AVC<P< ATC)
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    Loss if shut down
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chap10 - Chapter 10: Perfect competition Perfectly...

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