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精编密训教材,分阶快递。P=Minimum AC implies that the firm is operating at zero economic profits. Efficiency has been attained.
● Short Run
In the short run, the price curve remains horizontal but can increase or decrease in the short run. The optimal output is where MR=MC (P=MR intersects the MC). If there is no level at which MR=MC, select the highest level of output at which MR>MC.
●AVC, ATC and MC
MC intersects AVC and ATC at the minimum because when MC> AVC for example, them AVC will rise and vice versa.
●Conditions under perfect competition
1. P=MR. No pricing strategy. Firms are price-takers.
2. P=MC.Prices at which the product sells equals the extra cost incurred.
3. P=Minimum average cost.
4. Firms realize zero economic profit, or normal profits.
5. Firms have no incentive to price their goods and services below the market price.