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Unformatted text preview: The vertical line eQ intersects the cost curve at point S which determines average cost of producing output Q. The total cost that the firm has to bear in producing output Q units is equal to the area OQSC. The difference between total revenue and total cost shows extra profits that the firm earns. These are equal to the area CSeP. Profits TR - TC = OQeP -OQSC = CSeP Under monopolistic competition the conditions that matter are the demand curve and the average revenue of the firm. Any reference to marginal revenue and marginal cost is not necessary for such equilibrium....
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- Fall '10
- Economics, Cost curve, Chamberlin