Economics Notes 10.2.07

Economics Notes 10.2.07 - P<ATC Ch. 1-8, 13, 14...

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Short run: Shut-down: temporary reaction to market conditions 1) Lose all revenue from sale of goods 2) No longer pay variable costs 3) Still pay fixed costs Shut down if Total Revenue < Variable Costs TR/Q < VC/A AR < AVC Shut down if Price is less than Average Variable Cost Long Run: Exit – long run decision to leave the market 1) Lose all revenue 2) Save both variable and fixed costs Exit if Total Revenue < Total Cost Shut down if Price is less than Average Total Cost
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Unformatted text preview: P&lt;ATC Ch. 1-8, 13, 14 Bring normal calculator, ID, scantron, pencil SR: P=MR=MC Only produce if and only if P&gt;=AVC, otherwise shut down LR: P=MR=MC Produce if and only if P&gt;=ATC, otherwise exit When pi&gt;0, firms will enter in the LR price falls LR Equilibrium: pi = 0 If all firms have identical cost curves, profit = 0 for all firms If the cost structures vary, then only the marginal firm has profit = 0...
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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.

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Economics Notes 10.2.07 - P&amp;amp;lt;ATC Ch. 1-8, 13, 14...

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