Profit maximization for the Competitive Firm When mR>Mcˇ increase Q When R<Mcˇ decrease g When MR= Mc v Profit is maximized H arc Inc items and derived items copyright C 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Profit Maximization for the Competitive Firm When MR > MC increase Q When MR < MC decrease Q When MR = MC Profit is maximized
Copyright o 2001 by Harcourt, Inc. All rights reserved The Marginal-Cost Curve and the Firm's Supply Decision ■■■ Costs This section of the and firm's mc curve is Revenuel also the firm's supply curve. ATC 国国口口口 AVC 0 Quantit
The Marginal-Cost Curve and the Firm’s Supply Decision... 0 Quantity Costs and Revenue MC ATC AVC Copyright © 2001 by Harcourt, Inc. All rights reserved Q1 P1 P2 Q2 This section of the firm’s MC curve is also the firm’s supply curve
The firm's short-Run decision to shut down oA shutdown refers to a short -run decision not to produce anything during a specific period of time because of current market conditions o Exit refers to a long-run decision to leave the market H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Firm’s Short-Run Decision to Shut Down uA shutdown refers to a short-run decision not to produce anything during a specific period of time because of current market conditions. uExit refers to a long-run decision to leave the market
The firm's short-Run decision to shut down The firm considers its sunk costs when deciding to exit, but ignores them when deciding whether to shut down Sunk costs are costs that have already been committed and cannot be recovered H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Firm’s Short-Run Decision to Shut Down The firm considers its sunk costs when deciding to exit, but ignores them when deciding whether to shut down. uSunk costs are costs that have already been committed and cannot be recovered
The firm's short-Run decision to shut down he firm shuts down if the revenue it gets from producing is less than the variable cost of production. Shut down iftr< vc Shut down if TR/Q< VC/Q Shut down ife≤AVc H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. The Firm’s Short-Run Decision to Shut Down uThe firm shuts down if the revenue it gets from producing is less than the variable cost of production. Shut down if TR < VC Shut down if TR/Q < VC/Q Shut down if P < AVC