AP Economics – 10/29/19

I.  Bellwork:  https://www.youtube.com/watch?v=ZUFJJqO-ZMI

1. How is the price of a product set for a perfectly competitive firm?
2. How would you describe the demand curve for a perfectly competitive market? Is it inelastic, elastic, perfectly inelastic or perfectly elastic?
3. Why is the price of a product in this market structure set the way it is? What causes that?
4. In long-run equilibrium, what holds true for perfectly competitive firms regarding TR and TC?
5. What kind of profit do perfectly competitive firms realize in the long run?

II.  Objectives:

• Determine the profit-maximizing quantity of output for a price taking firm
• Assess whether or not a competitive firm is profitable
• Interpret economic models to form decisions on costs, profit, and production

III.  Discussion:  Perfect Competition 588-592

• Examine Table 58.1   p589
• Price Taker – what does that mean???
• MR = Price under Perfect Competition
• Price-taking firm’s optimal output rule p 589
• Copy Figure 58.1 p591
• Accounting Profit v Economic Profit

TR/Q =Average Total revenue & market price (P)

TC/Q = Average total cost (ATC)

TR=TC (Break-even)    or P=ATC

TR>TC (Profit)             or P>ATC p595 graph

TR<TC (Loss)             or P<ATC p595 graph

See 3.5 PPT on iLearn – start on slide 12

IV.  Classwork

• Page 592 1-2 &  Page 593 1-5
• 3.5 Perfect Competition Practice

AP Micro Economics F2019