Economics 1021A/B Lecture 18: Chapter 11

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Jeannie Ann Shearer

Document Summary

If marginal revenue exceeds marginal cost then the revenue from selling one more unit exceeds the cost of producing it and an increase in output will increase the economic profit. If marginal revenue is less than marginal cost then the revenue from selling one more unit is less than the cost of producing that unit so if you decrease your output then you will see an economic profit. If marginal revenue equals marginal cost then the revenue from selling one more unit equals the cost incurred to produce that unit. If this is seen to be a permanent occurrence, it will go out of business. If i shut do(cid:449)(cid:374) a(cid:374)d do(cid:374)"t lose a(cid:374)(cid:455)thi(cid:374)g, (cid:373)(cid:455) (cid:272)ost is just (cid:373)(cid:455) fi(cid:454)ed (cid:272)osts. If the firm shuts down, their quantity produced is zero so their economic loss must equal the total fixed cost.