![]() ![]() ![]() ![]() At the market equilibrium allocative efficiency is achieved. When the two curves intersect each other, p MC. Let's continue with our orange juice producing example In this situation I want to think about what a rational quantity of orange juice might be what would be a rational quantity of orange juice to produce given a market price So let's say that the market price right now is 50 cents a gallon and I'm going to assume that there are many producers here so we're going to have to be price takers and obviously we want to charge as much as we can per gallon but if we charge even a penny over 50 cents a gallon then people are going to buy all of their orange juice from other people so this is the price that we can charge 50 cents per gallon So, if we think about it in terms of marginal revenue per incremental gallon well that first incremental gallon we're going to get 50 cents the next incremental gallon we're going to get 50 cents for that one and the next one we're going to get 50 cents as well. The efficient use of profit maximization calculator in perfect competition, the point where marginal cost and the price becomes the same makes it possible. Supply curve is marginal cost to the society. At that point, the marginal revenue is higher than average total cost which means the firm is making an economic profit. ![]()
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