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Unformatted text preview: 3 $50 $150 For competitive firms, Marginal revenue = price for each quantity Marginal Revenue Marginal Cost = Marginal profit Profit maximization occurs where MR = MC all market structures | |-- P = MC if and only if you are a competitive firm Total fixed cost = $1000 Profit = total revenue total cost = total revenue (total fixed cost + total variable cost) = total revenue total variable cost Produce where MR = P = MC If and only if TR > TVC P > AVC TFC = $1000, P=$50 P=MR = MC where output (Q) = 200; AVC (Q=200) - $55 Should you produce or not? No, because price does not cover AVC Shut down Q = 0, Loss = $1000 Pi = TR-TC = $50(200)-TFC-TVC-$1000-$55(200) = -$2000 Farmer Jacks Costs AVC=TVC/Q Q AVC MC--1000 $2 $2 1800 $2.22 $2.50 2400 $2.50 $3.33 MC AVC...
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This note was uploaded on 03/31/2009 for the course ECON 101 taught by Professor Balon during the Spring '09 term at Linn Tech.
- Spring '09