Econ 2030 Test 2 Info

• CS= Benefit - Cost
•     = Reservation Price Buyers - Actual Price

• PS= Benefit - Cost
•    = Actual Price - Reservation Price Sellers

• ES= Consumer Surplus + Producer Surplus
• = Reser price Buyers - Reserv Price Sellers

• = Price buyers pay - Price sellers receive
• = Total - Subtotal

= (P - ATC) x Q

Produce quantity Q* where: Marginal Revenue = Marginal cost

• Remain in business: 
• (i.e., Produce Q* > 0) if P≥ Avg. Variable Cost

• Shut down:
• (i.e., Produce Q*=0) if P < Avg. Variable Cost

Price = Marginal Revenue at all levels of output.

Thus, Price = Marginal Revenue = Marginal Cost at (and only at) the profit-maximizing level of output, Q*