How to find the profit maximizing
quantity:
A firm will maximize its profit
(or minimize its losses) by producing that output at
which marginal revenue and marginal cost are equal
provided product price is equal to or greater than
average variable cost.
(1) Find the quantity where:
MR=MC
(2) produce this quantity if: AR
> AVC
How to find the productively
efficient quantity:
Society will achieve productive
efficiency by producing that output at which the average
total cost (ATC) is at a minimum.
Minimum ATC or
MC = ATC
How to find the allocatively
efficient quantity:
Society will achieve allocative
efficiency by producing that output at which price and
marginal cost are equal.
P=MC
Four Product Market Models1. Competitive Market (Ch. 10)Characteristics2. Monopoly (Ch. 11)
Characteristics3. Monopolistic Competition (Ch. 12)
Characteristics4. Oligopoly (Ch. 12)
Characteristics
