Perfect Competition
Profit maximization:
1. MR=MC
2. The level of output where MR=MC
3. The price at the MR=MC output compared to the ATC
a. If P>ATC--Economic Profit
b. If P=ATC--Normal Profit
c. If P < ATC but greater than AVC--Loss Minimizing
d. If P < AVC the firm will shut down
Short-run supply and shutdown decision
In the short run firms can produce at a profit, at a loss, or shutdown.
Behavior of firms and markets in the short run and in the long run
Efficiency and perfect competition
GRAPHING PRACTICE:
