Why do firms produce where MR = MC? Why not at the lowest point on their ATC curves? After all, it's the most efficient level of output.
Answer to relevant QuestionsWhy is the perfectly competitive firm's long-run supply curve identical to its marginal cost curve lying above its ATC? Can you think of markets in which there is absolutely no product differentiation? If you owned a firm in such a market, what would your demand curve look like? What would the demand curve for the market look like? Perfectly competitive firms in long-run equilibrium produce at the lowest point on their ATC curve. They produce at maximum efficiency. Yet, producing at an output that generates maximum efficiency isn't their intent. Why, ...Why is game theory useful in describing the behavior of firms in oligopoly? According to game theorists, do oligopoly prices tend toward equilibrium? Why, or why not? If the goal of both firms in a balanced oligopoly is to avoid ending up in a worst-case scenario, a Nash equilibrium results. Explain.
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