Lesson 3-6 Short Run Equilibrium and Short Run Supply in Perfect Competition Short Run Equilibrium equals output level where MR = MC Firm will stay at this output level unless something causes a change to its MR or MC curves. 4 possible total profit positions for a firm in SRE Supply Curve for Perfect Competition: Remember, Perfectly Competitive firm maximizes profit at which MR = MC, and Price = MR, so Price = MC, so firm will produce moving up and down along its MC curve.

Profit Maximization LO3 Cost and Revenue $ Output Economic Profit MR = P MC MR = MC AVC ATC P=$131 ATC=$

Loss-Minimizing LO3 Cost and Revenue $ Output Loss MR = P MC AVC ATC P=$81 ATC=$91.67 AVC = $75 8-3

Shutdown Case LO3 Cost and Revenue $ Output MR = P MC AVC ATC P=$71 AVC = $74 Short-Run Shut Down Point P < Minimum AVC $71 < $ Remember: Produce where MR=MC as long as P > AVC at that unit***