Perfect Competition; AP Microeconomics; Explanation of Cost Curves

Perfect competition graphs explained for the short-run and then what happens in the long-run. For the AP Microeconomics study guide email me at mjindrick@hotmail.com

The economics book associated with these videos is now on Amazon here: http://www.amazon.com/AP-Economics-Microeconomics-School-Students/dp/14635804...

Study questions:
1) In a graph, show supply and demand for the market. Label the price equilibrium as PM1 and label the equilibrium quantity as QM1. In a graph to the right of that, show the price, marginal revenue, average revenue and demand curve for the one firm in perfect competition. ii) On the graph for the one firm, show the marginal cost curve, along with an average total cost and average variable cost curve. Draw this so that the firm is making an economic profit. iii) In the long run, other firms see this profit and enter the market. Show the impact of this on the market, and the new price for the one firm. Label the new market price PM2 and the new equilibrium quantity QM2.
2) In another side by side graph, show supply and demand for the market and this time show the individual firm making an economic loss. ii) What would happen in the long-run in this market?
3) Is the demand curve for the individual firm in both of these cases perfectly elastic, perfectly inelastic, unit elastic or relatively inelastic? Explain.
4) Why is it that economists say that an individual firm in perfect competition cannot make a profit in the long run?

Category:

Education

Tags:

• Perfect Competition
• AP Microeconomics
• Economics
• Cost Curves
• AP Microeconomics Test

[Yushikinz]

Your video has helped me majorly! Thankyou so much!

But one quick question, how to we know that the average revenue line is greater than average total cost line?

[AdvancedEcon]

@Yushikinz I'm glad the video helped. To answer your question... Look at the video at 2:34 and look at the straight MR=P=AR=D line. Also, look at the quantity that I labeled as q*. From q* we have the MR=P=AR=D line higher than ATC, correct? So in other words AR (average revenue) is higher than ATC (average total cost) at q*. Therefore the difference between the two would be a positive economic profit (The orange area that I shaded in.). Make sense?

[hingwk13]

Thanks, this is great for my revision!

[AdvancedEcon]

@hingwk13 Im glad it helped out. See my other videos for more economics help.

[hamoric]

quite good, really helped a lot thanks!!

[ver4eto98]

thanks so much have an exam ur explanations r just like my teachers awesome thnks :)