Analyse the equilibrium of a firm under perfect competition, Managerial Economics

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We can analyse the equilibrium of a firm under Perfect Competition in both the long run as well as in the short-run.

SHORT RUN EQUILIBRIUM OF A FIRM UNDER PERFECT COMPETITION

Under short period, firm can face four different situations depending on whether:

 

  • AR> AC Supernormal Profits
  • AR = AC Normal profits
  • AR< AC Losses

• AR< AC < AVC                  Shut down point


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