Section 2
Production Decisions in Perfect Competition
Book
Version 3
By Boundless
By Boundless
Boundless Economics
Economics
by Boundless
5 concepts
![Thumbnail](../../../../../../figures.boundless-cdn.com/20421/square/0px-krispy-kreme-doughnuts.jpeg)
Relationship Between Output and Revenue
Output is the amount of a good produced; revenue is the amount of income made from sales minus all business expenses.
![Thumbnail](../../../../../../figures.boundless-cdn.com/20263/raw/profit-max-marginal-small.jpg)
Marginal Cost Profit Maximization Strategy
In order to maximize profit, the firm should set marginal revenue (MR) equal to the marginal cost (MC).
![Thumbnail](../../../../../../figures.boundless-cdn.com/20684/raw/costcurve-combined.jpg)
Shut Down Case
A firm will implement a production shutdown if the revenue from the sale of goods produced cannot cover the variable costs of production.
![Thumbnail](../../../../../../figures.boundless-cdn.com/20234/raw/profit-max-total-small.jpg)
The Supply Curve in Perfect Competition
The total revenue-total cost perspective and the marginal revenue-marginal cost perspective are used to find profit maximizing quantities.
![Thumbnail](../../../../../../figures.boundless-cdn.com/20295/raw/-the-short-run-28simple-29.jpg)
Short Run Firm Production Decision
The short run is the conceptual time period where at least one factor of production is fixed in amount while other factors are variable.