CAS EC 101 Study Guide - Midterm Guide: Monopolistic Competition, Perfect Competition, Demand Curve
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CAS EC 101 Full Course Notes
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Example: a gas station sells 1000 gals. of gas at . 00 per gallon. P < avc: how does the shut-down rule relate to the rm"s supply curve, shut down rule: company shut down if the price is less than average variable cost. Supply intercept with avc, below, shut down above no shutting down. Economic profit = tr total economic costs. = tr (explicit costs + implicit costs) = tr explicit costs implicit costs. < 0 exit occurs number of firms supply supply curve shifts l p* , q* , to 0: it"s making economics pro ts. Like perfect competition: many sellers, free entry and exit, downward sloping demand curve, product differentiation, demand curve much more elastic than monopoly. Like monopoly: what is the profit- maximizing q for a monopolistic competitor, what will happen in the long run if a monopolistic competitor is making pro ts loses? entry, make pro ts.