Profit max and Comp supply

Profit max and Comp supply - PGP I Term I Produce at least...

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PGP I Term I
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Produce at least cost given the production technology and input prices. Supply output to the level that profit is maximized (today’s discussion) Separation of ownership and control and revenue maximization goal
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Profit=Total Revenue-Total Cost If firm’s profit maximizing output level is q, then profit: ) q ( MC ) q ( MR 0 ) q ( MC ) q ( MR 0 q C q R q π C(q) R(q) π(q)
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q* R(q) C(q) A B π(q) output Cost, Revenue, Profit q 1 q 2 C q**
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Price taking behaviour Product homogeneity Free entry and exit Full information, rationality, constant time and no uncertainty.
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P 0 Output Price Market demand curve Individual firm’s perceived demand Market supply curve
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P 0 Output Price P=MR P MR q TR Pq TR
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Output Cost, Price MC ATC AVC P 0 q 0 q 1 q 2 A B C D G H E F
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Output Cost, Price MC ATC AVC P 2 P 1 P 0 q 0 q 1 q 2 P=MR A B C P=AVC=Break even
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Output Cost, Price MC ATC AVC P=AVC Short run supply curve
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Profit max and Comp supply - PGP I Term I Produce at least...

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