3.3.2.4 - profits and losses

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5 Terms

1
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what is normal profit?

the minimum profit necessary to keep a firm in operation, where AR = AC

2
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what is abnormal profit?

when AR is GREATER than AC

3
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what is a loss?

when AR is LESS than AC

4
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what is the short-run shutdown condition?

in the SR, a firm should leave the market temporarily if AR > AVC but they are not meeting AC

5
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what is the long-run shutdown condition?

in the LR, a firm should shut down and shift their FOP if their AR < AVC