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Unformatted text preview: the fixed costs are divided by more quantity the farther along the graph you go A competitive firms short term supply curve is its marginal cost curve that lies above the AVC curve In the long run, the firm must produce above the ATC to stay in the market In the long run the competitive firms cannot make excess profit because more firms will enter the market Therefore, the only sustainable point in the market is producing at the point where the MC=ATC ATC is also at its lowest point, meaning the firms are supposed to be performing at minimum costs, which is also known as technically efficient At each point P=MC and the significance of this is that P is equal to MB (marginal benefit) for consumers, so P reflects MB (marginal benefit) MB=MC and therefore allocative efficiency is obtained...
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- Fall '07