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UCI / Economics / ECON 20 / How do you illustrate the average total cost curve?

How do you illustrate the average total cost curve?

How do you illustrate the average total cost curve?

Description

School: University of California - Irvine
Department: Economics
Course: Basic Economics I
Professor: J. rodriguez lope
Term: Fall 2015
Tags: Economics
Cost: 25
Name: Economics 20A--bundle 2
Description: Full notes-- on the firm, maximizing profits,positive,negative and zero economic profits,tax,competition, short run, long run effects, affects of fixed cost changes, monopoly--full chapter, price discrimination, Nash equilibrium,duopoly,public good,marginal valuation,reaction curves,externality.
Uploaded: 02/02/2016
4 Pages 135 Views 1 Unlocks
Reviews

SK Notetaker (Rating: )

Great handwriting! Very neat!



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LectureDon't forget about the age old question of How do we draw resonance structures?

Fixed cost: Total Cost when output is 0

Average cost:

Marginal Cost:

  • Added cost of additional unit
  • Marginal cost increases because of diminishing marginal product

Don't forget about the age old question of What is trigometric substitution?

Derivation (total product) = marginal productDon't forget about the age old question of Give an example of aldehydes.

Derivative (total cost) = marginal cost

Maximizing profitsIf you want to learn more check out scientific principles What does effective science require?

Profit by def = total revenue - total costIf you want to learn more check out real culture sociology

Q

Total revenue (p=8)

Total Cost

Profit

0

0

10

-10

1

8

11

-3

2

16

14

2

3

24

19

5

4

32

26

6

5

40

35

5

6

48

46

2

Max: 6If you want to learn more check out What are the rules in IUPAC?

So maximize profit by producing 4.

Marginal Revenue: added revenue of additional unit

Marginal revenue

Total Cost

Marginal Cost

Marginal Profit

Profit

0

8

10

-10

1

8

11

1

7

-3

2

8

14

3

5

2

3

8

19

5

3

5

4

8

26

7

1

6

5

8

35

9

-1

5

6

8

46

11

-3

2

Profit maximization occurs at the quantity where marginal revenue = marginal cost

When

When

Suppose the price is P. The firm produces quantity .

Show by how much it could increase profit by slightly reducing output

                                        

                                        EF

Average Total Cost Curve

                                                Show total cost at output

                                                

                                                Area of rectangle D, q, A, ATC,

                                                Total revenue =

                                                Profit =

                        

                                        

                                                

                                                        

                                                        

1) Draw a marginal cost curve, and an average cost curve.

Show a price at which the firm makes a loss.

Show on the diagram the amount of the loss

2) Draw a marginal cost curve, and an average cost curve.

        Show the price at which the firm makes zero economic profits.

3) Tax

  • Shifts MC up by amount of tax.
  • With no tax,
  • With tax:
  • So with tax,

Shifts ATC by amount of tax

                                                        

Effect of tax on firm’s output

Competition

Define: firm as price taker

Does not mean that firms actively fight each other

Discussion

1.

                                                                Firms enter

                                                

                                                        

                                                

2.        

                                                        Firms exit

                                                

3. Competitive Markets:

  • Many buyers                ⎫ assumptions
  • Many sellers                ⎬
  • Free exit and entry        ⎭

Firms earn 0 economic profit

4. Long run ⟶ amount of time to exit

                

                Economic profit = 0

5.                                                                   by less than S2

                                                                  [(if S2]MC]

                                                                  Short-run

  • Negative economic profit  firms leave until they make 0 economic profit

Short run effect of increased fixed costs in a competitive market.

  • Market price is unchanged
  • Total quantity bought and sold is unchanged
  • Each firm incurs a loss
  • Quantity produced by each firm is unchanged.

  1. Consider the long-run effects of increased fixed costs in a competitive market.

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