ECON 2000 Chapter Notes - Chapter 9: Average Variable Cost, Longrun, European Cooperation In Science And Technology
Document Summary
Chapter 9: long run costs & output decisions: breaking even: the situation in which a firm is earning exactly a normal rate of return, because a firm must bear fixed costs whether or not is shuts down, its decision depends solely on whether total revenue from operating is sufficient to cover total variable cost, shutdown point: the lowest point on the average variable cost curve. At all prices below it, optimal short run output is zero: short run industry supply curve: the sum of the marginal cost curves (above avc) of all the firms in an industry, the short run supply curve of a firm in a perfectly competitive industry is the portion of its mc curve that lies above its avc curve, a firm that is earning positive profits in the short run and expects to continue doing so has an incentive to expand in the long run.
