Illustrate and explain how the profit maximizing level of production and is determined in perfect competition. Illustrate and explain what it means for the market to move towards a long-term equilibrium condition.
A perfectly competitive firm is presumed to produce the quantity of output that maximizes economic profit, i.e., the difference between total revenue and total cost. This production decision can be analyzed directly with economic profit, by identifying the greatest difference between total revenue and total cost, or by the equality between marginal revenue and marginal cost.
Profit-maximizing output can be identified in one of three ways--directly with economic profit, with a comparison of total revenue and total cost, and with a comparison of marginal revenue and marginal cost.
Profit: First, profit maximization can be illustrated with a direct evaluation of ...
Profit-maximizing output is assessed.