Supernormal Profit: Perfect and Imperfect Competition

Market Structures · Micro
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MC AC D = AR = MR (perfect competition) AR = D (imperfect competition) MR (imperfect competition) Supernormal profit
In both market structures the firm maximises profit where MC = MR, and price is read from the demand (AR) curve at that output. Here average cost is low enough that price is above AC at q₁, so the firm makes supernormal profit: (AR − AC) × q₁.