Micro (5)

A firm maximizes profit in the short run when marginal revenue (MR) equals marginal cost (MC).

A firm earns abnormal profit when price (P) is greater than average total cost (ATC) at the equilibrium output level.

A firm incurs losses when average total cost (ATC) is greater than price (P).

In the long run, abnormal profits disappear due to increased supply and reduced demand for other firms.

Occurs when firms agree to restrict supply or fix prices (illegal in many places).

Many firms offer similar but not identical products; free entry and exit.

Lower market power compared to monopolies due to many substitutes and high demand elasticity.

A firm makes normal profit when average revenue (AR) equals average cost (AC); no economic profit.

Total revenue (TR) exceeds total cost (TC), including explicit and implicit costs.

Total costs (TC) exceed total revenue (TR); firm not covering all costs.

A few large firms operate in a market with high barriers to entry; interdependence is key.

A firm with economies of scale so large that it can serve the entire market at lower cost than multiple firms.

Decreased per-unit production cost as output increases.

Occurs when Marginal Revenue (MR) equals Marginal Cost (MC).

Occurs when Marginal Revenue (MR) equals zero.