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CHARACTERISTICS:
1. Many firms in the industry
2. Produce differentiated product
-different trade mark, location,
packaging,etc
3. A firm can control price. Its demand
curve is downward sloping curve.
4. Relatively easy entry and exit
SHORT RUN EQUILIBRIUM
To determine price and output that maximize
profit
MR =MC
Diagram
Possible conditions:
1.Super normal profit
2. Normal Profit
3. Sub normal profit
P
MC
P*
AC
AC
e.g P=55-2Q Q*
TC= 15,000+40Q
Q=3.75
P=47.5
MR
Qty
T.Profit= -14971.9