10.21.10 Econ

10.21.10 Econ - 10/21/10 Notes Marginal Cost Curve is the...

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Marginal Cost Curve is the Supply curve for the Firm/Producer Firm making profit is in green The fact that there’s economic profit in this industry -> new entry into the market Economic firms lure firms in – economic profit means you can make more here than anywhere else (greater than normal returns As new firms enter, the demand (demand becomes = to Marginal revenue) falls to a certain price level and all of a sudden the firm receives no economic profit because although MC = MR, all 3 curves go through the same point. It maximizes profits but there’s no economic profit. This is the special case of long run equilibrium. Case of LR equilibrium is when Price = MC = AC Meaning there’s 0 economic profit. So although firm is maximizing profits, that number turns out to be zero in economic terms. So there’s no incentive for entry, and there’s no incentive for exit. That’s why it’s long run equilibrium. Economic Profit is very different from accounting profit.
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10.21.10 Econ - 10/21/10 Notes Marginal Cost Curve is the...

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