Show normal profit equilibrium, Managerial Economics

Assignment Help:

Q. Show Normal profit equilibrium?

Normal Profits: With the condition of  MC = MR and MC cuts the MR from below, if E is the point of stable equilibrium, output of firm is OM. produce this output, firm incurs an average cost ME, whereas it earns average revenue, that is also equal to ME. So, we see that the firm just makes a normal profit - i.e., its AR = AC. Because the total revenue earned and total cost incurred at output OM is OPEM, firm earns a normal profit.

2181_Show Normal profit equilibrium.png

Figure: Normal profit equilibrium


Related Discussions:- Show normal profit equilibrium

At what price will demand for product be unitary elastic, Suppose you have ...

Suppose you have estimated the following demand function for the product you sell: Q = 5 - 0.2P At what price will the demand for your product be unitary elastic? (Hint: B

How is marginal analysis lead to profit-maximizing quantity, How is margina...

How is marginal analysis lead to profit-maximizing quantity of output? Marginal Analysis leads to Profit-Maximizing Quantity of Output: The price-taking firm’s optimal outpu

Danger of over-specialising - reason for protection, Danger of over-special...

Danger of over-specialising   A country may feel that in its long-term interests it should not be too specialized. A country may not wish to abandon production of certain

The extreme end of the beach, Assume that Nicolas and Orson plan to sell so...

Assume that Nicolas and Orson plan to sell soft drinks on a beach this summer. The beach is 400 meters long and sunbathers are spread evenly across its length. Nicolas and Orson se

Intended or planned investment, Intended or planned Investment Expendit...

Intended or planned Investment Expenditure on investment depends on business expectations on the chance of making profits and on the availability of funds for the purchase of p

Show the example on transaction cost theory, Q. Show the example on transac...

Q. Show the example on transaction cost theory? Coase begins from standpoint that markets could in theory carry out all production and that what needs to be illustrated is th

Search theories - a brief'' historical overview, SEARCH THEORIES  -  A BR...

SEARCH THEORIES  -  A BRIEF' HISTORICAL OVERVIEW   A search theory of unemployment is found even in the writings of A. C. Pigou in  the inter-war  period. To explain the  high

Scarcity and oppotunity cost, how manager can apply scarcity and oppotunity...

how manager can apply scarcity and oppotunity cost in managerial decision making

Explain the point elasticity, Point elasticity The point elasticity of ...

Point elasticity The point elasticity of demand is described as the proportionate change in quantity demanded in response to a very small proportionate change in price. The con

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd