ECON 101 Lecture Notes - Lecture 13: Perfect Competition, Short Turn, Market Impact
Document Summary
Firm"s profit is defined as profit = tr tc. Positive profit: profit = tr tc > 0. Breaking even: profit = tr tc = 0. Negative profit: profit = tr tc < 0. For the competitive firm, profit can be equivalently written as profit = p q tc. For such firms, the positive profit condition can be written as: For the competitive firm, we know that their optimal output (q ) occurs where p = mc. The firms will then make a profit if, at q , it is also the case that p > atc. If, however, at q it is the case that p < atc, then the firm will have negative profits. Finally, if at q , p = atc, then profits will be zero. In this special case, since p = atc, and p = mc (by definition at q ), we have that mc = atc at q .