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PERFECT COMPETITION AND SHORT-RUN SUPPLY CURVE: A perfectly competitive firm's supply curve is that portion of its' marginal cost curve that lies above the minimum of the average variable cost curve. A perfectly competitive firm maximizes profit by producing the quantity of output that equates price and marginal cost. As such, the firm moves along it's marginal cost curve in response to alternative prices. Because the marginal cost curve is positively sloped due to the law of diminishing marginal returns, the firm's supply curve is also positively sloped.
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SHORT-RUN PRODUCTION ALTERNATIVES A firm faces three production options in the short run based on a comparison between price, average total cost, and average variable cost. If price is greater than average total cost, a firm earns an economic profit by producing the quantity that equates marginal revenue with marginal cost. If price is less than average total cost but greater than average variable cost, a firm incurs an economic loss, but produces the quantity that equates marginal revenue with marginal cost. If price is less than average variable cost, a firm shuts down production in the short run, incurring an economic loss equal to total fixed cost.
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GREEN LOGIGUIN [What's This?]
Today, you are likely to spend a great deal of time searching the newspaper want ads wanting to buy either a wall poster commemorating the 2000 Presidential election or a rechargeable flashlight. Be on the lookout for bottles of barbeque sauce that act TOO innocent. Your Complete Scope
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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SWIFT Society for Worldwide Interbank Financial Telecommunications
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