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OU ECON 1123 - Economic Losses

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ECON 1123 1st Edition Lecture 13 Outline From Previous Lecture (Lecture 12)I. Supply in Purely Competitive MarketsA) The Characteristics of Pure competition B) The Purely Competitive firm in short-run equilibriumC) The competitive firm’s marginal revenue scheduleD) Short Run Profits and Average Total CostsOutline Lecture 13I. Economic LossesII. Short Run Losses and Average Variable CostsIII. Firm and Market Supply in the short runLecture 13 NotesI. Economic LossesIf price = ATC -> you will have zero economic profitIf price > ATC -> positive economic profitIf price<ATC -> negative economic profitII. Short Run Losses and Average Variable CostsShort run losses and average variable costs. Rule: The competitive firm will cease production (shut down) when price falls below the minimum average variable costsWill a firm always shut down if they aren’t making a profit? Not necessarily: the firm may be staying in business to minimize losses by paying back the money for their factory or things like thatIII. Firm and Market Supply in the short runMarket supply = sum of individual firms supply (mc) schedulesYou can derive the market supply graph from adding all of the firms mc schedules together. (Qo=QAo+QBo+QCo)If the firm has zero economic profits that implies that price=average total costThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a


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