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Unformatted text preview: curve of the firm is neither above nor below the MR = AR curve. The two are just tangential at point e3. The Marginal Cost curve also passes from this point and hence MR = MC. Equilibrium output is Q3 . For this output level both Total Revenue and Total Costs are equal. Hence profits of the firm are zero. TR = TC = OQ 3e3 P, TR - TC = Profits = 0 The firm is therefore making only normal profit. Note that in the case of an optimum firm in equilibrium not only MR = MC but also AR = AC. Hence in the long run, full equilibrium condition of a competitive market is that all firms should be of optimum efficiency and should make only normal profits....
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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