Economics 1021A/B Lecture Notes - Lecture 11: Demand Curve

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ECON 1021A/B Full Course Notes
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ECON 1021A/B Full Course Notes
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If the price (mr) is , the profit-maximizing output is 7 sweaters a day. Mc = mr and the firm incurs a loss equal to tfc. At a price below the shutdown point, the firm produces nothing. If the price (mr) is , mr = atc and the firm earns zero economic profit (breaks even). If p is between the shutdown price and the breakeven price, the firm incurs a loss, but one that is less than tfc. Mc = mr = atc = breakeven point. We can use the cost curves to construct the supply curve: The firm is indifferent between producing or not at the shutdown point, t. The firm"s supply curve is the mc curve above the minimum avc (the shutdown point). Below the shutdown point would be ignored and graphed like that -> this is because the firm will not operate if the prices are below 17 dollars as they will lose a lot of money.

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