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Unformatted text preview: Cost. Hence profits are seen to be 0 - 40 = - 40, 20 - 50 = - 30, 55 - 60 = -5, 90 -70 = 20, 115 - 80 = 35, 125 - 90 = 35 and 130 -100 = 30. Initially for the first three units of productive activity, TC exceeds TR and profits are negative. From the 4th unit onwards, profits become positive. Between the 5th and the 6th units, profits are maximum and profit value is $35. Beyond this output level, the profit starts falling again. The equilibrium position has been marked in the table. It is between the 5th and the 6th units. It is clear that when a firm attains equilibrium its Marginal Revenue is equal to Marginal Cost. Again, MR = MC = 5. Between these output units, the Average Total Cost of production is minimum i.e. between 3.46 to 3.60. Every requirement of a firm’s equilibrium under competition has been satisfied at an output level of 6 units....
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This note was uploaded on 11/26/2011 for the course ECON MICRO ec 201 taught by Professor - during the Fall '10 term at Montgomery.
- Fall '10