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Unformatted text preview: Marginal revenue – change in total revenue that results from a one-unit increase in quantity sold; calculated by dividing change in total revenue by change in quantity sold (∆TR/∆Qsold) Short run decisions Short run – time frame in which each firm has a given plant and number of firms in the industry is fixed Firms must react price fluctuations and decide: 1. Whether to produce or to shut down temporarily 2. If the decision is to produce, what quantity to produce Long run decisions Long run – time frame in which each firm can change the size of its plant and decide whether to leave the industry Other firms can decide whether to enter the industry so both the plant size of each firm and number of firms in the industry can change Constraints can change in the long run Firm must react to long run changes and decide: 1. Whether to increase or decrease its plant size 2. Whether to say in an industry or leave it Profit-Maximizing Output...
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This note was uploaded on 04/07/2008 for the course CMUN 160 taught by Professor O'brien during the Spring '08 term at Loyola Chicago.
- Spring '08