DAY 3 PP Perfect Competition in Long Run.ppt

DAY 3 PP Perfect Competition in Long Run.ppt - Warm-Up...

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Warm-Up Warm-Up 1. Identify the break-even and shut- down prices for the firm. 2. Identify a point where the firm earns a profit. 3. Identify a
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Perfect Competition Perfect Competition in the Long Run in the Long Run
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The Short-Run The Short-Run Individual Supply Individual Supply Curve Curve The short-run individual supply curve shows how an individual producer’s optimal output quantity depends on the market price, taking fixed cost as given. A firm will cease production in the short run if the market price falls below the shut- down price , which is equal to minimum average variable cost. 7 6 5 4 3 3.5 2 1 0 $18 16 14 12 10 MC ATC AVC C B A E Minimum average variable cost Short-run individua l supply curve Shut- down price Price, cost of bushel Quantity of tomatoes (bushels)
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The Short-Run Market The Short-Run Market Equilibrium Equilibrium The short-run industry supply curve shows how the quantity supplied by an industry depends on the market price given a fixed number of producers.
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