1. Q O Q1 Q2 MC, MR MC MR Rule The firm should produce where MR = MC
PROVIDED
that above that output MC exceeds MR and below
that output MR exceeds MC.
MC, MR MC
Animate rule Q O Q1 Q2 MR

2. Shut down point
Costs, revenue AC
P = AVC
AVC
AR = D Q O Q

3. Using calculus to find maximum profit output
TR = 48Q – Q2
TC = Q + 3Q2

4. Q TR TC
Tπ = TR –TC 12
-12 1 47 31 16 2 92 56 36 3
135 87 48 4
176
124 52 5
215
167 6
252
216 7
287
271
Animate color……..

5. FINDING WHERE MR = MC MR = dTR dQ MC = dTC
Differentiating the TR and TC gives
dTR = 48 – 2Q = MR
dTC = 16 – 6Q = MC
Animate at bullets

6. Profit is maximized where MR = MC:
48 – 2Q = Q
Solving this for Q gives:
32 = 8Q
Q = 4
The equation for total profit is
Tπ = TR –TC
= 48Q – Q2 – ( Q + 3Q2)
= – 4Q2
Putting Q = 4
Tπ = 52
Animate at bullets

7. Slope = – 1
Slope = – 2 AR Q MR

8. Type of market
Number of firms
Freedom of entry
Nature of product
Examples
Implication for demand curve of firm
Perfect competition
Very many
Unrestricted
Homogenous (undifferentiated)
Grains (wheat) or vegetables
Horizontal; firm is a price taker
Monopolistic competition
Many / Several
Differentiated
Plumbers, restaurants
Downward sloping but relatively elastic; firm has some control over prices.

9. Type of market
Number of firms
Freedom of entry
Nature of product
Examples
Implication for demand curve of firm
Oligopoly or Cartel
Few
Restricted
1.Undifferentiated or 2. Differentiated
Cement, cars, electrical appliance, oil.
Downward sloping relatively inelastic but depends on reactions of rivals to a price change
Monopoly
One
Restricted or completely blocked
Unique
WAPDA, or KESC
Downward sloping more inelastic than oligopoly; firm has considerable control over price

10. A price taking firm P O O Q Q (a) The market (b) The firm AR,MR (RS)
D=AR = MR P* D O O Q Q
(millions)

11. Firm makes super normal profits
Costs, revenue MC AC
D=AR = MR AR V T AC K L Q O Q*

12. Firm makes normal profits
Costs, revenue MC
AC` T
D=AR = MR V AR Q O Q*

13. Firm makes loss
Costs, revenue MC
AC`` S AC U
D=AR = MR AR V T Q O Q*