Monopoly

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Department
Agriculture + Resrce Econ
Course
AREC 202
Professor
Christopher Goemans
Semester
Fall

Description
18 November What would happen to the market for steak if the price of steak sauce went down? Short run & long run In the short run, market demand rises, price rises, MR for individual rises. You don’t make more because MC > MR. You don’t produce less because MC < MR. You produce where MC = MR. TC = Q x ATC In the long run, more producers will enter the market, driving the price down. Price falls all the way back to the breakeven price (no economic profit) Step 1: In the market, demand shifts out and equilibrium price goes up Step 2: As a result, individual producers see large economic profit Step 3: People enter the market until prices fall to their original levels (due to the presence of economic profit) Step 1 is an exogenous shock. Producers didn’t change price, or anythin
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