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

AP Micro Economics F2019