2. Q012345TC568121828MC - - -124610 ∆TC / ∆Q ∆TC / 1 ∆TC / ∆Q 1/11/11/11/1 ∆TC / 1 2/12/12/12/1 Table A

3. = Q01234567MR - - - 10101010101010MC 1247101522 Additional profit - - -98630 - 5 - 12

4. Perfect Competition

5. Entire Market A Single Perfect Competitor S D 10 D P Q P Q in millions in hundreds Why not raise the price? Why not lower the price? No revenue Less revenue

6. Q0123P10101010TR0102030MR - - - 101010 P = MR D = P D = P = MR

7. Average Cost (AC) 22.535 Total Cost (TC) 25920 Q1234

8. TR = 60 Profits = Total Revenue – Total Costs Example… P = 10 Q = 6 TR = ? AC = 7 TC = 42 TC = ? Profits= 60 – 42 = 18 Profits = 60 – 42 = 18

9. 60 P, MR, MC, AC Q 10 MC D = MR = P 6 7 Profit Maximization MC = MR Profit = TRTC – 42 = 18 Profit AC

10. Economic Profits = 0 Normal Profits EP means firms in this market are earning more than firms in other markets. MC D = MR AC S D 88 1,000 107 3 5 S2S2S2S2 3 P > AC 1,500 P QQ PMC MR AC P, MC, MR, AC Market for Widgets Widget Firm One firm produces only a small amount of the market’s total. Economic Profit D = MR P = AC

11. P, MR, MC, AC Q 8 MC D = MR = P 10 6 TR = ? TC = ? Profit = ? AC 2 10

12. P, MR, MC, AC Q 8 MC D = MR = P 10 10 TR = ? TC = ? Profit = ? AC - 2 10

13. P, MR, MC, AC Q 8 MC D = MR = P 10 TR = ? TC = ? Profit = ? AC

14. Monopoly

15. D Q P q1q1q1q1 p1p1p1p1 q2q2q2q2 p2p2p2p2

16. Q012345P1086420TR08121280MR - - -840 - 4 - 8 MR < P Table C

17. 10 0 5 3 MR D PMR P, MR Q Q012345P1086420MR - - -840 - 4 - 8 4 Table C

18. p At the given quantity “q,” what is my AC? At the given quantity “q,” what price can I charge? 8 ac 10 5 Profit = TR – TC TC = AC × Q TR = P × Q How much profit? D MR MC AC Q P, MC, MR, AC q Profit Maximization MC = MR Profit What is TC? What is TR?

19. intermission

20. P, MR, MC, AC Q 11 11 MC D = MR = P 10 9 AC

21. 9 10 5 D MR MC AC Q P, MC, MR, AC

22. AC Q AC 1B 100M 100 110 10M Satellite Radio Cost of 1 Satellite: $1 Billion Having more than one company will divide the market, drop Q, and increase AC.

23. Monopolistic Competition

24. d d d d d D Q P d

25. 6 11 5 D MR MC AC Q P, MC, MR, AC

26. 6 11 5 D MR MC AC Q TR = 55 TC = 30 Profit = 25

27. 9 12 5 D MR MC AC Q P, MC, MR, AC TR = 45 TC = 60 Profit = -15

28. 10 5 D MR MC AC Q P, MC, MR, AC TR = 50 TC = 50 Profit = 0 Economic profit is 0 Normal profit Long-Run Equilibrium