Selecting Output in Short Run
* We will combine production and cost analysis with demand to determine output and profitability.
A Competitive Firm Making Positive Profit Selecting Output in Short Run
* Production Decisions' summary
- Profit can be maximized when MC = MR
- If P > ATC firm is making profits.
- If AVC < P < ATC firm should generate at a loss.
- If P < AVC < ATC firm should shut-down.
The Short Run Output of Aluminum Smelting Plant