Let us make an in-depth study of the competitive firm’s short-run supply curve. A supply curve, tells us how much output it will produce at every possible price. We have seen that competitive firms will increase output to the point at which P = MC, but they will shut down if P < AVC. Thus, for positive output the firm's [...]
Let us make an in-depth study of the important quotas and tariffs imposed by the government. Many countries use import quotas and tariffs to keep the domestic price above world levels and, thereby, enable the domestic industry to enjoy higher profits than it would be possible under free trade. We will see that the cost to society from this protection [...]
Let us make an in-depth study of the demand and marginal revenue for a competitive firm. Since in a competitive industry, each firm sells only a small fraction of the entire industry sales, how much output the firm decides to sell will have no effect on the market price. The market price is determined by the industry demand and supply [...]