Cost Curves - at the margin If output prices are not...

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Cost Curves At the last unit where, MR >/ = MC: o If P >/ = ATC, the firm realizes a profit or breaks-even and will produce in long run o If ATC > P >/= AVC, the firm suffers loss but should still produce in short run but not in long run o IF AVC>P, firm suffers losses The firm’s short run supply curve is the MC curve above AVC The market supply curve is the summation of individual firm supply curves Key Points Profit maximizing output levels can be identified by comparing costs and revenue
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Unformatted text preview: at the margin If output prices are not sufficient to cover average variable costs, a firmw ill cease production The firms marginal cost curve above aveargag variable costs is also firms supply curve. Supply curve is a positive slope because MC is increasing (and MC is increasing because of law of dimininshing marginal returns) The market supply curve is nothing more than the summation of individual firm supply curves...
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This note was uploaded on 03/30/2008 for the course AAEC 1006 taught by Professor Mjellerbrock during the Spring '07 term at Virginia Tech.

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