Short-Run Decision: Produce or Shut Down?
The Shutdown Rule
Decision Tree
Break-even price = min ATC; Shutdown price = min AVC
Three Price Zones
The Firm's Short-Run Supply Curve
Long-Run Decision: Enter or Exit?
Entry and Exit Conditions
How Entry Affects the Market
How Exit Affects the Market
Worked Example: Short-Run to Long-Run
Shutdown vs. Exit
AP Exam Tips
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Common Mistakes
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Unit 3 topics
Unit 3 overview3.1The Production Function3.2Short-Run Production Costs3.3Long-Run Production Costs3.4Types of Profit3.5Profit Maximization3.6Firms' Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit3.7Perfect Competition3.8Long-Run Equilibrium and Efficiency in Perfect Competition