Econ 101 Winter 2010 Lecture 24

# Econ 101 Winter 2010 Lecture 24 - Economics 101...

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Click to edit Master subtitle style Lecture 1 Economics 101 Microeconomics University of Michigan Winter 2010 Lecture 24

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Lecture 1 22 Today: Chapters 10, 11 of text Monday: Chapter 14 Available on Ctools Last week of discussion sections No quiz in discussion this week Reading Problem Set 13
Lecture 1 Unit Cost Curves Q AC, MC (\$) AFC ATC = AFC + AVC AVC MC Q* AF C

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Lecture 1 Min AC Profit maximization: P > min ATC MC, AC (\$) Output AC Q0 MC P0= P 1 AVC ATC1 Q1 Profit
Lecture 1 Profit maximization: P < min AVC MC, AC (\$) Output ATC MC P Q AVC ATC Loss AVC Avoidable Loss Fixed Cost

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Lecture 1 Profit maximization: MC, AC (\$) Output ATC MC P Q AVC ATC Loss AVC Fixed Cost
Lecture 1 Lessons In the long run n If P > min ATC then choose Q so that MC = P n If P < min ATC then shut down In the short run n If P > min AVC then choose Q so that MC = P n If P < min AVC then shut down Firms might produce at a loss in the short run

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Lecture 1 More issues regarding firm flexibility: Short run n that period of time over which we cannot vary
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Econ 101 Winter 2010 Lecture 24 - Economics 101...

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