ap economics
Download
Skip this Video
Download Presentation
AP Economics

Loading in 2 Seconds...

play fullscreen
1 / 9

AP Economics - PowerPoint PPT Presentation


  • 64 Views
  • Uploaded on

AP Economics. Mr. Bernstein Module 59: Graphing Perfect Competition November 5, 2013. AP Economics Mr. Bernstein. Is this Perfectly Competitive firm making a profit?. AP Economics Mr. Bernstein. Is this Perfectly Competitive firm making a profit? Profit Maximizing Output = 5

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' AP Economics' - ellard


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
ap economics

AP Economics

Mr. Bernstein

Module 59:

Graphing Perfect Competition

November 5, 2013

ap economics mr bernstein
AP EconomicsMr. Bernstein

Is this Perfectly Competitive firm making a profit?

ap economics mr bernstein1
AP EconomicsMr. Bernstein

Is this Perfectly Competitive firm making a profit?

  • Profit Maximizing Output = 5
  • Profit Per Unit = 8-6 = 2
  • Total Profit = 5 * 2 = 10
ap economics mr bernstein2
AP EconomicsMr. Bernstein

Is this Perfectly Competitive firm making a profit?

  • The Profit can be

viewed as a rectangle

with size Q * (P – AC)

ap economics mr bernstein3

$

MC

ATC

ATC

P

P=MR=d=AR

Q*

Output

AP EconomicsMr. Bernstein

Is this Perfectly Competitive firm making a profit?

  • NO!!
  • ATC > P
ap economics mr bernstein4

$

MC

ATC

P=MR=d=AR

Output

Q*

AP EconomicsMr. Bernstein

Is this Perfectly Competitive firm making a profit?

  • P = ATC
  • Economic Profit = 0
  • AKA Normal Profit
  • Breakeven Point
  • Only occurs at the

minimum of the

ATC curve…

ap economics mr bernstein5
AP EconomicsMr. Bernstein

The Short-Run Production Decision

  • Why continue to produce if P = MR = MC?
  • Because loss from producing at P = MC may be less than loss of producing 0!
  • The Shut-down Rule:
    • Shut down if TR < TVC
    • Shut down if P < AVC
ap economics mr bernstein6

MC

$

ATC

P=ATC

P=MR=d=AR

Output

Q*

AP EconomicsMr. Bernstein

The Short-Run Production Decision

  • Shut down when P < AVC (MC is supply curve)

AVC

Shut-down

Price

ap economics mr bernstein7
AP EconomicsMr. Bernstein

The Long Run Production Decision

  • In the long run, firms unable to earn a profit would not only shut down short term, they would exit the industry
  • Remember in Perfect Competition there are no barriers to entry or exit
ad