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At Q = 8 units, P = ATC , the company is at the short run equilibrium in NORMAL times to earn ZERO
profit.
At Q = 9 units, P > ATC , the company is at the short run equilibrium in GOOD times to earn POSITIVE
economic profit.
### The condition of profit-maximzing is to produce at the quantity at which the marginal revenue
equals the marginal cost and the market price.
2
Case 3 – negative economic profit / economic loss (P < ATC at the profit maximizing Q)
Econ
TR $ MR $ TC $ AVC $ ATC $ MC $ Profit $
Q (P*Q) (∆ of TR/∆ of Q) (TFC+TVC) TVC $ (TVC/Q) (TC/Q) (∆ of TC/∆ of Q) (TR-TC)
0 0 NA 22 0 NA NA NA -22.00
1 17 17 45 23 23.00 45.00 23.00 -28.00
2 34 17 66 44 22.00 33.00 21.00 -32.00
3 51 17 85 63 21.00 28.33 19.00 -34.00
4 68 17 100 78 19.50 25.00 15.00 -32.00
5 85 17 114 92 18.40 22.80 14.00 -29.00
6 102 17 126 104 17.33 21.00 12.00 -24.00
7 119 17 141 119 17.00 20.14 15.00 -22.00
8 136 17 160 138 17.25 20.00 19.00 -24.00
9 153 17 183 161 17.89 20.33 23.00 -30.00
At Q = 7 units, P < ATC and P = AVC , the company is at the short run equilibrium in BAD times. It is
indifferent for the firm to stay in the market or not with the same outcome incurring a NEGATIVE
economic profit of $22 – the total fixed cost.
At Q = 7 units, P < ATC and P < AVC , the company is at the short run equilibrium in BAD times. The
firm should leave the market temporarily to minimize the loss at $22 – the total fixed cost.
### The condition of profit-maximzing is to produce at the quantity at which the marginal revenue
equals the marginal cost and the market price.
3
Case 5 – produce some units with an economic loss
Econ
TR $ MR $ TC $ AVC $ ATC $ MC $ Profit $
Q (P*Q) (∆ of TR/∆ of Q) (TFC+TVC) TVC $ (TVC/Q) (TC/Q) (∆ of TC/∆ of Q) (TR-TC)
0 0 NA 22 0 NA NA NA -22.00
1 17.1 17.1 45 23 23.00 45.00 23.00 -27.90
2 34.2 17.1 66 44 22.00 33.00 21.00 -31.80
3 51.3 17.1 85 63 21.00 28.33 19.00 -33.70
4 68.4 17.1 100 78 19.50 25.00 15.00 -31.60
5 85.5 17.1 114 92 18.40 22.80 14.00 -28.50
6 102.6 17.1 126 104 17.33 21.00 12.00 -23.40
7 119.7 17.1 141 119 17.00 20.14 15.00 -21.30
8 136.8 17.1 160 138 17.25 20.00 19.00 -23.20
9 153.9 17.1 183 161 17.89 20.33 23.00 -29.10
10 171
Q1: What is the price? $ 17.1 210 188 18.80 21.00 27.00 -39.00
### Q2: What should be the output level? produce some outputs
Q3: What is the economic profit? $
At Q = 7 units, P < ATC and P > AVC , the company is at the short run equilibrium in BAD times. The
firm should stay in the market even though it is incurring a loss $21.3 – a loss less than the total
fixed cost $22.
### The condition of profit-maximzing is to produce at the quantity at which the marginal revenue
equals the marginal cost and the market price.
4
1. Short-Run Equilibrium in Normal Times (earn zero economic profit) – Case 1