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

Perfect Competition: Shor...s to Long Run Equilibrium
Perfect Competition-SR Profit to LR Equilibrium

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