3.3.3 Profits

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12 Terms

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profit

the total revenue - the total cost

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profit calculation

pi = TR - TC

3
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supernormal profit

occurs when profit is greater than 0 and the total revenue is greater than the total cost

4
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normal profits

when profit is equal 0 and TR = TC

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subnormal profits

when profit is less than 0 and the TC<TR

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what does the MC/supply curve tell us

tells a firm the max number of units it can produce at a given price

7
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short run shut down point + graph

occurs when the marginal cost/supply meets the minimum point of the average variable cost curve

<p>occurs when the marginal cost/supply meets the minimum point of the average variable cost curve</p>
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long run shut down point

occurs when MC/S = AC

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cost and revenue diagram

profit is the red box

<p>profit is the red box</p>
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what a change in demand shift in the costs and revenue diagram

AR and MR ( draw digram

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what does a change in fixed costs shift

AC ( draw diagram)

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what does a change in variable costs shift

the AC and MC curve