As the extra products MC was higher considering legislation of shrinking productivity, MR could be less than MC; that is, the business perform loss gain generating more products. Thus, this is actually the funds promoting returns top.
目次
In this situation, the businesses economic losses equals the overall fixed can cost you
The shutdown point is the level of output and price at which the firm just covers its total variable cost. If the MR of the product is less than the minimum average variable cost (min AVC), the firm will shut down because this action minimizes the firms loss. If MR < min AVC, then each additional unit produced would increase the loss. For pure competition, MR is equal to price as the firm is facing a perfectly elastic demand. Therefore, for short run, if Price < min AVC, then the firm should shut down. If Price > min AVC, then the firm should produce. Price and MC are compared to find the profit maximizing or loss minimizing output level. The supply curve of the pure competition firms would be the portion of the MC curve above the min AVC.
1. If EP < - FC or Market P < Min AVC, firm should shut down. Output = 0 , and EP = -FC
dos. When the EP > – FC otherwise Business P > Minute AVC, company is always to build. Firm’s output top are going to be from the in which MR=MC or P=MC. Use EP = TR – TC discover economic funds of the enterprise.
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