When firms exit a perfectly competitive industry, the market supply curve shifts to the left.1/20/2024 The firm maximizes its profit at the output X e, where the distance between the TR and TC curves is the greatest. The shape of the total-cost curve reflects the U shape of the average-cost curve, that is, the law of variable proportions. It is constant and equal to the prevailing market price, since all units are sold at the same price. The slope of the TR curve is the marginal revenue. The firm is a price-taker and can sell any amount of output at the going market price, with its TR increasing proportionately with its sales. The total-revenue curve is a straight line through the origin, showing that the price is constant at all levels of output. In figure 5.2 we show the total revenue and total cost curves of a firm in a perfectly competitive market. Either by using the TR and TC curves, or the MR and MC curves. The equilibrium of the firm may be shown graphically in two ways.
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