{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Here we consider economic profit competitive market

Info iconThis preview shows pages 3–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Here we consider economic profit.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Competitive Market in the Short Run. Amount of capital (K) held is fixed # firms is fixed (no entry or exit) (a) The short-run quantity decision Firms take price as given Firms face short-run cost curves (as capital is fixed) Problem of the competitive firm: Max (q) = TR(q) TC(q) Necessary condition: MR = MC. With price taking behavior p=MC(q) optimal q*
Background image of page 4
Competitive Market in the Short Run.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Competitive Market in the Short Run. The shutdown condition and short run supply curve. Price (q) ≥AVC(q) otherwise shutdown. If satisfy this shutdown condition, firm will supply the level of output that satisfies: P = MR = MC
Background image of page 6
Competitive Market in the Short Run.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Competitive Market in the Short Run. Aggregate Supply Curve: aggregating (“Add up”) supplied quantities across all firms in industry. Q agg = q 1 +q 2 +…+q n
Background image of page 8
Competitive Market in the Short Run.
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}