ECO100Y1 Lecture Notes - Lecture 8: Taipei Metro
Document Summary
Mr=mc q* is profit-maximizing level of output. To answer: add atc schedule compare p to atc. If commodity is infinitely divisible, there is a unique profit-maximizing level of output at mr=mc: graphs (implicit, calculus. If commodity is not infinitely divisible, there are two levels of output -- before mr=mc and after mr=mc. - where profit is the same: numerical examples, see text, table 14. 2 (p298) for an example. The firm is not making enough revenue to cover its average total cost (atc), the firm would choose to exit the market in the long run. (shaded area represents the loss) If firm produces q=10 (and does not shut down), p>avc (have not shown avc) Loss=tfc, which is greater (absolute value) than . Decisions of perfectly competitive firm: summary: choose output (q) that maximizes profit. P=mc (mr=mc: determine if it should shut down in short-run* P
