00:01
So here we're talking about a firm in competition.
00:02
So i'm going to draw a firm in competition, quantity and price.
00:07
A firm and competition faces a flat demand curve, right? because they take the price as given.
00:13
And we also know that this demand curve is below its average total cost curve.
00:19
So average total cost looks something like this.
00:21
This is the situation that we have.
00:23
So there are two options here.
00:26
It's not average, right, because we have to think about the firm's options.
00:30
The firm can think about whether it wants to shut down.
00:35
If it shuts down, no, it produces and earns revenue minus cost.
00:47
If it shuts down, it loses the fixed cost, right? this is the idea of fixed cost.
00:53
It's a cost that you're already committed to...