ECON 1B03 Chapter Notes - Chapter 8-13: Marginal Revenue, Monopoly Profit, Taipei Metro
Shanghaibalcony1234 and 37744 others unlocked
46
ECON 1B03 Full Course Notes
Verified Note
46 documents
Document Summary
Average revenue: average revenue, ar: revenue firm receives for a typical unit sold, average revenue is total revenue divided by the quantity sold, ar=(tr)/q p*q/q=p, average revenue is equal to price because q"s cancel out. Profit maximization: notice that p=ar=mr, suppose we know the firm"s tc of producing at each of the previous quantity levels, we can easily calculate profit: profit=tr-tc, since we know tc, we can calculate the firm"s mc. If mr>mc, the firm should produce that product: producing one more gallon of juice adds more to revenue than it does to total costs. Firm"s short-run profit: a firm"s profit is , profit=(tr/q-tc/q)q. If profit is positive, then the price is greater than atc, if the firm is bringing in a greater amount of money than it costs to produce that good. If profit is negative then the price is less than the atc. Sr shutdown decision: sometimes a firm will choose not to produce anything at all.