AP Economics – 10/30/19

I. Bellwork: on Google classroom

II.  Objectives:

  • Evaluate a perfectly competitive firm’s situation using a graph
  • Determine a perfectly competitive firm’s profit or loss
  • Explain how a firm decides whether to produce or shut-down in the short-run

III.  Discussion:  “Micro 3.8 Perfect Competition in the Short Run

A.  Perfectly competitive firms take the market price – graph

B.  Review:

1.  Profit maximization Quantity of Output – Graph p.590

2.  Minimum Average Total Cost – Graph p591

  • ATC is at its lowest point & intersects MC
  • P=ATC (Break-even point)

C.  Short-Run Production Shut down Rule

  1.  Fixed Costs – do not change with production (exist even if you don’t produce)
  2.  Variable costs – increase with production (stop if you shut down)
  3.  Shut-Down Rule

P>AVC         continue producing

P<AVC          shut-down  /stop producing (short run)

P<ATC         shut-down (long run)

IV.  Classwork on iLearn

  • 59.1-59.2 & Exit 59

V.  Quiz on Tomorrow on Sections 58 & 59


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