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FIRMS IN COMPETITIVE MARKET - Coggle Diagram
FIRMS IN COMPETITIVE MARKET
Types of costs
Average cost (AC)
Average fixed costs (AFC)
AFC = TFC / Q
Average variable costs (AVC)
AVC = TVC / Q
Average total costs (ATC)
ATC = TC / Q
Marginal cost (MC)
= change in total cost / change in quantity
Market
Perfect competitions
Oligopoly
Monopolistic
Monopoly
Supply
Quantity supplied
Law of supply
Demand
Quantity demanded
Law of demand
Equilibrium & types of profits
Normal
Subnormal
Supernormal
Competitive market
Many buyers and sellers in the market
Homogeneity of output
No barries to entry or exit
Perfect information of all products
Equal access to technology
Perfectly mobile factors of production
Short run
If ATC is below market clearing prices
Abnormal profits made
Signals to other firms to enter market
Supply increase = price set below market clearing = ATC = MC
Long run
Profits cannot be made
Firms would be completed away
Produce at market clearing price
ATC = MC
Firms statically efficient
Supply reduces, price increases
Firms being making loses
Both productively + allocatively efficient at the same time