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Market Price Discovery #1 Perfect Competition

Market Price Discovery #1 Perfect Competition. Remember the firm’s supply curve?. P=MR=AR. Page 102 in booklet. P=MR=AR. Firm’s supply curve starts at shut down level of output. Page 102 in booklet. Profit maximizing firm will desire to produce where MC=MR. P=MR=AR.

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Market Price Discovery #1 Perfect Competition

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  1. Market Price Discovery #1Perfect Competition

  2. Remember the firm’s supply curve? P=MR=AR Page 102 in booklet

  3. P=MR=AR Firm’s supply curve starts at shut down level of output Page 102 in booklet

  4. Profit maximizing firm will desire to produce where MC=MR P=MR=AR Page 102 in booklet

  5. Economic losses will occur beyond output OMAX, where MC > MR P=MR=AR Page 102 in booklet

  6. Firm is a “Price Taker” Under Perfect Competition The Market The Firm Price Price D S AVC MC PE QE OMAX Quantity

  7. If Demand Increases…… The Market The Firm Price D1 Price D S AVC MC PE QE 10 11 Quantity

  8. If Demand Decreases…… The Market The Firm Price Price D S D2 AVC MC PE QE 9 10 Quantity

  9. Firm is a “Price Taker” in the Input Market Labor Market The Firm Price Price D S MVP MIC WE QE LMAX Quantity

  10. If Demand Increases…… Labor Market The Firm Price Price D S MVP WE MIC QE LMAX Quantity

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