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Active Learning Cooperative Learning Discovery Learning Community Economic Profit

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Mr. Clifford's 60 second explanation of the shut down rule. When the price falls below AVC a firm should shut down and produce nothing. It is better for them to take their fixed costs as a loss then to continue to produce. PLease keep in mind that these clips are not designed to teach you the key concpets.

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APMic U3 L6 firms short-run and long-run decisions to enter or exit a market

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1. Should firms ever continue to produce even though they are earning a loss?

2. Are firms ever indifferent to staying in a market or exiting the market?

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Explain (using graphs or data where appropriate) firms’ short-run decisions to produce positive output levels, or long-run decisions to enter or exit a market in response to profit-making opportunities.

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Firms’ short-run decisions to produce output, and long-run decisions to enter or exit a market, are based on profitability.

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In the short run, firms decide to operate (i.e., produce positive output) or shut down (i.e., produce zero output) by comparing total revenue to total variable cost or price to average variable cost (AVC).

In the absence of barriers to entry or exit, in the long run (i.e., once factors that are fixed in the short run become variable), firms enter a market in which there are profit-making opportunities and exit a market when they anticipate economic losses.

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Production, cost, and the perfect competition model | Khan Academy

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This unit covers production and cost analysis and the behavior of firms in perfect competition. Topics include an introdduction to the short-run production function, diminishing marginal returns, the link between productivity and costs, the relationships that exist among cost curves, long-run costs, economies and diseconomies of scale, profit maximization, and the behavior of firms in perfectly competitive markets in the short run and the long run.