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PERFECT COMPETITION, SHORT-RUN PRODUCTION ANALYSIS: A perfectly competitive firm produces the profit-maximizing quantity of output that equates marginal revenue and marginal cost. This production level can be identified using total revenue and cost, marginal revenue and cost, or profit. Because a perfectly competitive firm faces a perfectly elastic demand curve, it efficiently allocates resources by equating price and marginal cost. In addition, the marginal cost curve above the average variable cost curve is the perfectly competitive firm's short-run supply curve.
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AVERAGE VARIABLE COST Total variable cost per unit of output, found by dividing total variable cost by the quantity of output. When compared with price (per unit revenue), average variable cost (AVC) indicates whether or not a profit-maximizing firm should shut down production in the short run. Average variable cost is one of three average cost concepts important to short-run production analysis. The other two are average total cost and average fixed cost. A related concept is marginal cost.
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BEIGE MUNDORTLE
[What's This?]
Today, you are likely to spend a great deal of time at a flea market hoping to buy either a pair of blue silicon oven mitts or a coffee cup commemorating the 2000 Olympics. Be on the lookout for slightly overweight pizza delivery guys.
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This isn't me! What am I?
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Al Capone's business card said he was a used furniture dealer.
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"There comes a time when the mind takes a higher plane of knowledge but can never prove how it got there. " -- Albert Einstein, physicist
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GEB
Games and Economic Behavior
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