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Perfect Competition: Short Run Equilibrium

Perfect Competition: Short Run Equilibrium. Assumed as Fixed: State of the Arts in Technology Resource Prices Fact that firm is technically efficient at the moment (Note: The above are the same assumptions we made when looking at short run production costs.)

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Perfect Competition: Short Run Equilibrium

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  1. Perfect Competition: Short Run Equilibrium

  2. Assumed as Fixed: • State of the Arts in Technology • Resource Prices • Fact that firm is technically efficient at the moment • (Note: The above are the same assumptions we made when looking at short run production costs.) • 4. All those things that we assume are fixed when we talk about the market demand for a product.

  3. QTY TFC TVC TC ATC AVC MC 0 $30 $ 0 $30 $5 $5 5 $35 1 30 35 4.50 4 9 19.50 30 2 39 5 6 15 30 3 15 45 5.50 7 13 30 4 22 52 6 8 12 30 5 30 60 7.50 15 12.50 30 6 45 75 9.71 23 14 30 7 68 98

  4. PRICE Q TR AR MR $0 $15 0 $15 $15 $15 1 $15 $15 $15 2 $30 $15 $15 $15 3 $45 $15 . . . 150000 $15 $15 10000 $15

  5. MC MR QTY TFC TVC TC ATC AVC 0 $30 $ 0 $30 $5 $15 $5 5 $35 1 30 35 $15 4.50 4 9 19.50 30 2 39 $15 6 5 15 30 3 15 45 5.50 $15 7 13 30 4 22 52 8 6 $15 12 30 5 30 60 15 7.50 12.50 30 6 45 $15 75 23 $15 9.71 14 30 7 68 98

  6. MC MR QTY TFC TVC TC ATC AVC 0 $30 $ 0 $30 $5 $15 $5 5 $35 1 30 35 $15 4.50 4 9 19.50 30 2 39 $15 6 5 15 30 3 15 45 5.50 $15 7 13 30 4 22 52 8 6 $15 12 30 5 30 60 15 7.50 EQUILIBRIUM 12.50 30 6 45 $15 75 23 $15 9.71 14 30 7 68 98

  7. QTY TFC TVC TC ATC AVC MC 0 $30 $ 0 $30 $5 $5 5 $35 1 30 35 4.50 4 9 19.50 30 2 39 5 6 15 30 3 15 45 5.50 7 13 30 4 22 52 6 8 12 30 5 30 60 7.50 15 12.50 30 6 45 75 9.71 23 14 30 7 68 98

  8. QTY TFC TVC TC ATC AVC MC 0 $30 $ 0 $30 $5 $5 5 $35 1 30 35 4.50 4 9 19.50 30 2 39 5 6 15 30 3 15 45 5.50 7 13 30 4 22 52 6 8 12 30 5 30 60 7.50 15 12.50 30 6 45 75 9.71 23 14 30 7 68 98

  9. AR QTY TFC TVC TC ATC AVC 0 $30 $ 0 $30 $5 $5 5 $35 1 30 35 4.50 4 9 19.50 30 2 39 5 6 15 30 3 15 45 5.50 7 13 30 4 22 52 6 8 12 30 5 30 60 7.50 15 $15 12.50 30 6 45 75 9.71 23 14 30 7 68 98

  10. AR = TR / Q ATC = TC / Q

  11. AR = TR / Q ATC = TC / Q SUPPOSE AR GREATER THAN ATC WOULD IT BE POSSIBLE FOR TR TO BE LESS THAN TC?

  12. AR = TR / Q ATC = TC / Q SUPPOSE AR GREATER THAN ATC WOULD IT BE POSSIBLE FOR TR TO BE LESS THAN TC? NO!!!!!

  13. QTY TFC TVC TC ATC AVC MC AVC $10 $10 0 50 $5 1 70 4.50 2 95 5 3 125 5.50 4 165 6 5 225 7.50 6 9.71

  14. QTY TFC TVC TC ATC AVC MC AVC $10 $10 0 50 40 $5 1 70 20 4.50 2 95 25 5 3 125 30 5.50 4 165 40 6 5 225 60 7.50 6 9.71

  15. MR QTY MC 0 40 $25 1 20 $25 2 25 $25 3 $25 30 4 $25 40 5 $25 60 6

  16. MR QTY MC 0 40 $25 1 20 $25 2 25 $25 EQUILIBRIUM 3 $25 30 4 $25 40 5 $25 60 6

  17. QTY TFC TVC TC ATC AVC MC AVC $10 $10 0 50 40 $5 1 70 20 4.50 2 95 25 5 3 125 30 5.50 4 165 40 6 5 225 60 7.50 6 9.71

  18. QTY TFC TVC TC ATC AVC MC AVC $10 $10 0 50 40 $5 1 70 20 4.50 2 95 25 5 3 125 30 5.50 4 165 40 6 5 225 60 7.50 6 9.71

  19. AR QTY TFC TVC TC ATC AVC MC AVC $10 $10 0 50 40 $5 1 70 20 4.50 2 95 25 $25 31.67 5 3 125 30 5.50 4 165 40 6 5 225 60 7.50 6 9.71

  20. AR QTY TFC TVC TC ATC AVC MC AVC $10 0 $10 $10 $10 0 50 40 $5 1 70 20 4.50 2 95 25 $25 31.67 5 3 125 30 5.50 4 165 40 6 5 225 60 7.50 6 9.71

  21. AR QTY TFC TVC TC ATC AVC MC AVC $10 0 $10 $10 $10 0 50 40 $5 1 70 20 4.50 2 95 25 $25 $85 31.67 5 3 125 30 5.50 4 165 40 6 5 225 60 7.50 6 9.71

  22. AR QTY TFC TVC TC ATC AVC MC AVC $10 0 $10 $10 $10 0 50 40 $5 1 70 20 4.50 2 95 25 $25 $85 31.67 28.33 5 3 125 30 5.50 4 165 40 6 5 225 60 7.50 6 9.71

  23. QTY TFC TVC TC AVC MC LOSS TR $10 0 $10 $10 0 10 $10 0 50 40 $5 1 70 20 4.50 2 95 25 75 $85 20 3 125 30 5.50 4 165 40 6 5 225 60 7.50 6 9.71

  24. COST ATC AVC MC ATC AVC MC OUTPUT

  25. P MARKET P S DEMAND FOR ONE FIRM'S OUTPUT D $15 $15 D 0 Q 0 Q Q DEMAND WOULD REMAIN FLAT AT $15 FOR ANY QUANTITY THAT THIS FIRM IS PHYSICALLY CAPABLE OF PRODUCING

  26. P DEMAND FOR ONE FIRM'S OUTPUT D $15 0 Q

  27. P DEMAND FOR ONE FIRM'S OUTPUT P = 15, AR = 15, MR = 15 D $15 0 Q

  28. COST ATC REVENUE AVC MC ATC D P = AR = MR AVC MC OUTPUT

  29. COST ATC REVENUE AVC MC ATC D P = AR = MR AVC MC OUTPUT

  30. COST ATC REVENUE AVC MC ATC D P = AR = MR AVC MC Q OUTPUT

  31. COST ATC REVENUE AVC MC ATC D P = AR = MR AVC MC Q OUTPUT

  32. COST ATC REVENUE AVC MC ATC D P = AR = MR AVC MC Q OUTPUT

  33. COST ATC REVENUE ECO. PROFIT AVC MC ATC D P = AR = MR AVC MC Q OUTPUT

  34. Assumed as Fixed: • State of the Arts in Technology • Resource Prices • Fact that firm is technically efficient at the moment • (Note: The above are the same assumptions we made when looking at short run production costs.) • 4. All those things that we assume are fixed when we talk about the market demand for a product.

  35. COST ATC REVENUE AVC MC ATC AVC D P = AR = MR MC OUTPUT

  36. COST ATC REVENUE AVC MC ATC AVC D P = AR = MR MC OUTPUT Q

  37. COST ATC REVENUE AVC MC ATC AVC D P = AR = MR MC OUTPUT Q

  38. COST ATC REVENUE AVC MC ATC NORMAL PROFIT!!! AVC D P = AR = MR MC OUTPUT Q

  39. COST ATC REVENUE AVC MC ATC AVC P = AR = MR D MC OUTPUT

  40. COST ATC REVENUE AVC MC ATC AVC P = AR = MR D MC Q OUTPUT

  41. COST ATC REVENUE AVC MC ATC AVC P = AR = MR D MC Q OUTPUT

  42. COST ATC REVENUE AVC MC ATC AVC P = AR = MR D MC Q OUTPUT

  43. COST ATC REVENUE AVC MC LOSS WITH ATC PRODUCTION AVC P = AR = MR D MC Q OUTPUT

  44. COST ATC REVENUE AVC MC ATC AVC MC P = AR = MR D OUTPUT

  45. COST ATC REVENUE AVC MC ATC AVC MC P = AR = MR D Q OUTPUT

  46. COST ATC REVENUE AVC MC ATC AVC MC P = AR = MR D Q OUTPUT

  47. COST ATC REVENUE AVC MC ATC AVC MC P = AR = MR D Q OUTPUT

  48. COST ATC REVENUE AVC MC LOSS AND ATC SHUTDOWN AVC MC P = AR = MR D Q OUTPUT

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