EC notes 10-26 - P< AVC= company should shut down P = AVC = making no profit What is the supply curve of a firm The part of the marginal cost

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EC notes 20:19 How to measure profit Total Profit= (Profit/Q) x (Q) Maximizing total profit vs maximizing profit per unit (not the same) Firm perfect competition Graph on slide*** Dotted line at 2=maximized profit per unit Dotted line at 5=maximizing total profit What if no profit? AC > P= negative= loss Should the firm shut down…? Compare total revenue to variable cost Focus on the variable cost Short run- forget fixed costs and only focus on the variable costs If price exceeds the average variable cost, you could continue to produce
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Unformatted text preview: P < AVC= company should shut down P = AVC = making no profit What is the supply curve of a firm? The part of the marginal cost curve that is equal to or above the average variable cost Bc when the marginal cost curve goes below the average variable cost, the firm supposedly shuts down What is the short run supply curve of the industry? MC= short run supply curve 20:19 20:19...
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This note was uploaded on 01/18/2012 for the course ECON 201 taught by Professor C.liedholm during the Summer '07 term at Michigan State University.

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EC notes 10-26 - P< AVC= company should shut down P = AVC = making no profit What is the supply curve of a firm The part of the marginal cost

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