ECO101H1 Lecture Notes - Lecture 15: Perfect Competition, Market Price, Longrun
elizabethkandelaki and 40134 others unlocked
98
ECO101H1 Full Course Notes
Verified Note
98 documents
Document Summary
Mr = mc q* is profit-maximizing level of output: is firm earning economic profits, add atc schedule compare p to atc. If commodity is not infinitely divisible, there are two levels of output - before mr = mc and after mr = Tr / q > tc / q p > atc. Tr / q < tc / q p < atc profits break even loss. Profit: (p - atc) x q = (25 - 20) x 10 = 50. Economic profit: (p - atc) x q = (25 - 30) x 10 = -50. Market ss = sum of firms" ss = sum of firms" mc. The market for hot dogs is perfectly competitive, and the typical hotdog stand is earning economic profits. Economic profits new firms enter ss shifts to right market price falls. When economic profits are zero and there is no incentive for firms to enter (or leave) the industry.