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Econ – Nov 2.docx

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Department
Economics
Course
ECON101
Professor
All Professors
Semester
Fall

Description
Econ – Nov 2 Finding the Profit Maximizing Output for a Perfectly Competitive Firm 1. Find the quantity where P=MC, call this quantity q*. 2. At this quantity, q*, get the value of AVC. Check the shut­down rule: If PAVC, continue on the next steps 3. Find the ATC associated with the q*. 4. Calculate the maximum profits using p= (P – ATC)q* From this process, we get the quantity, q*, that each firm produces and each firm’s  maximum profit. (each firm’s supply curve) Q* = (Number of firms)q* because all of the firms are identical in a perfectly  competitive market. (market’s supply curve) Supply Curve for the individual firm = MC until you get below AVC then it jumps to zero Market Supply Curve = summation of supply curves of individual firms Prof
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