ER / Concepts
PC Decision Map
Created · Updated
The map
| Question | Benchmark | Note |
|---|---|---|
| Where does come from? | Market: MSC = MDC | Supply Curve |
| How much? (one more unit) | , MC rising | Profit Maximization |
| Profit or loss? (all units) | vs ATC: | Short-run and Long-run Equilibrium |
| Produce at all? (all units) | SR , LR | Shutdown Rule |
| Firm vs market | ; firm costs use | Perfect Competition |
| Efficiency | Allocative , Productive , LR PC: both | Allocative vs Productive Efficiency |
One unit or all units?
Marginal (MC, MR) → one more unit → only “how much?” Average (ATC, AVC) → all units → “profit?” and “produce at all?”
Exit decision vs where the price ends up
- One firm deciding to exit: is below its ATC (at the it produces)?
- After all entry/exit has stopped, the market price ends up at .