Perfect competition in the short run - output decision.
THe blue line is flat at 8 which is the price. The supplier (red) will produce 284 units of output at pice e to maximize profits. THe profits will be the difference between how much they can get (8) and the cost (284)... THe average cost is total cost/quantity.
YELLOW is the profit function.
Marginal revenue = equal to price. 6.5 is profit per unit.
Because a competitive firm is a price taker....
Total Revenue = Price x Quantity - Total Cost(Q)
- Q P TR MR
- 1 3 3
- 2 3 6 6-3=3
- 3 3 9 9-6=3