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Unformatted text preview: -buyers and sellers know whats going on in the market-know their competition -customers only care about price-all market participants know what is going on in the market! d. No barriers to entry/exit-if anyone wants to sell—free to enter market and set up shop OR if deems to leave market—allowed to leave -implication to this is in the long run economic profit will be equal to 0 -in the long run, implication is going to be 0 2. Firm behavior in the short run: How much to produce? (marginal revenue= marginal cost) a. Case 1: P > ATC i. Equilibrium quantity Q* > 0 ii. Profit > 0-positive economic profit b. Case 2: P = ATC i. Equilibrium quantity Q* > 0 ii. Profit = 0 c. Case 3: ATC > P ≥ AVC i. Equilibrium quantity ii. Profit < 0 d. Case 4: P < AVC i. Equilibrium quantity ii. Profit e. Conclusions 3. Graphically III. NEXT TIME A. Finish Chapter 14: “Perfect Competition” B. Begin Chapter 15: “Monopoly”...
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- Fall '07
- Economics, i. Equilibrium quantity