ECON101 Lecture Notes - Lecture 9: Economic Equilibrium, Profit Maximization, Perfect Competition

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Nov 16th
1. from in short run equilibrium can be earning:
above normal profit
below normal profit
normal profit
when:
normal profits represents profits that are high enough to keep existing firms
in the industry however, low enough to keep new firms from entering the
industry
above normal profits
industry 1
equilibrium: industry
price (PI), quantity (QI) = determined by the intersection of industry demand
(DI, SI)
equilibrium: firm
price (PI) = determined by intersection of industry by demand and supply
quantity (QF)= determine by the profit maximization condition (MR
(=PI)=SMC)
cost per unit of producing firm’s equilibrium output (QF) ; given by SAC (CF)
look on graph 2
since the price/unit (PI) > cost/unit (CP) the firm is earning above normal
profits
below normal profits
3 4
schedule unit cost = average cost
everything else is the same as above normal profits ^
since the price/unit (PI) < cost/unit (CF) the firm is earning below normal
profits
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