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What is short run loss and how does it happen?
When MC(where MR = MC) < ATC but MC > AVC
Continue producing since FC can still be paid, and AVC can be lowered until there is profit
What is a short run shutdown and how does it happen
When MC(where MR = MC) < AVC
Stop producing since FC can’t be paid no matter what, since FC doesn’t change
Market and Firm Profit is maximized when?
At the quantity where the MC = MR(or sometimes the last quantity where MC < MR
What is short run profit and how does it happen?
When MC(where MR = MC) > ATC
Keep producing as you are gaining money
Compare a SR(short run) single firm perf comp equilibrium to an industry equilibrium
Both caused by meeting of S(MC in single firm) and D(MR in single firm) curves
But in single firm equilibrium demand can not change, in industry supply and demand can change equilibrium
What is a break-even point?
Where MC=MR is = ATC
No profit, meaning firm can’t do any better, so it should continue to produce
