Pure Competition

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Submitted By jadeecute
Words 477
Pages 2
I will only show the analysis in the short run using pure competitive market.
Here I will discuss the following : How to maximize profit , what if, price is greater that average total cost , price is equal to average total cost , price is greater than average variable cost and the decision of the firm whether shutdown or continue operating.
To maximize profit we will use the marginal revenue equals marginal cost approach. (MR=MC)
Natutunannatinnayung marginal revenue, itoyung additional revenue sapagproduceng additional quantity o karagdagangkitasapaggawangkaragdagangprodukto. Yung marginal cost namanitoyung additional cost sapagproduceng additional quantity oyungkaragdaganggastossapaggawangkaragdagangprodukto.
So sa MR=MC approach ,kapagang marginal revenue ay mas malakisa marginal cost, ibigsabihin may profit yungisang firm. Kapagang marginal revenue ay equal sa marginal cost, ibigsabihinnamamaxizeyung profit o namiminimizeyung losses. Kapagang marginal cost ay masmalakisa marginal revenue, ibigsabihin may losses yung firm.
Iilustratenatinsiyasa graph gamityung analysis sa pure competitive market

mc mc mc ATC ATC
P MR = D P MR=D P MR=D ATC

To maximize profit is simply MR=MC.
Nakikitanatin graph yung intersection ng MC at MR. Yan ang point nanamamaximizeyung profit or namiminimizeyung losses.
Saunang graph naman, makikitanatinnanasa baba ng price yung Average total cost kaya ibigsabihinnagkakaaroonng profit. Sanakikitanating box yunyung profit.
Saikalang graph naman Equal yung ATC at P kaya tinatawagsiyang Breakeven. Kung saanwalang profit at walang losses.
Yung ikatlong graph nasataasyung ATC. IBigsabihin may losses. Sanakikitanating box yunyung losses.

Shutdown price
So yungmgatao nag dedemandyanng goods sa market diba, kapagbumabayung demand…...

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