Econ 1011 - Lecture 13

Casetwopositiveprofit 1 supposethemarketpriceis10 2

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Unformatted text preview: If
Q
set
above
where
P=MC
then
P
<
MC
and
an
 additional
unit
of
output
raises
revenue
by
P
but
raises
 cost
(MC)
by
more
therefore
profit
falls.
 
 iii. Chicken
and
Egg
problem
 1. Firm
takes
market
price
as
given
to
decide
output
 2. Price
determined
by
the
sum
of
outputs
of
all
firms
 3. So
…

to
get
the
price
you
needs
outputs,
but
to
decide
 output
you
need
the
price!
 iv. Case
One:

Zero
Profit

 1. Using
the
Broom
factory
example
from
before
 2. Suppose
the
market
price
...
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