            Suppose that firm j is perfectly competitive. Case 1) If the market price Pmkt is greater than the minimum of firm j's average total cost (ATC) curve, then firm j maximizes its short run (SR) profits at the output level, denoted Qj*, that satisfies the condition: marginal revenue equals marginal cost (MR = MC). In this case, firm j's SR profits at Qj* are positive and equal to [Pmkt - ATC(Qj*)] x Qj* > 0, where ATC(Qj*) denotes average total cost at Qj*. Note that if Pmkt equals the minimum of the ATC curve (Pmkt = ATC(Qj*)), then firm j's SR profits at Qj* are zero and firm j is said to be at its SR break-even point. Case 2) If the market price Pmkt is between the minimum of the average variable cost (AVC) curve and the minimum of the ATC curve (i.e., min AVC < Pmkt < min ATC), then a firm j maximizes its SR profits (i.e., minimizes its loss) at the output level Qj* that satisfies the condidtion MR = MC. In this case, firm j's SR profits at Qj* are negative but its loss at Qj* is less than its loss if firm j were to shut down and produce zero output, the latter of which would be equal to its total fixed costs, TFC. That is, -TFC < j's SR profits at Qj* = [Pmkt - ATC(Qj*)] x Qj* < 0. Case 3) If the market price Pmkt equals the minimum of the AVC curve, then firm j maximizes its SR profits (i.e., minimizes its loss) either at the output level Qj* that satisfies the condition MR = MC or at 0 (zero) output. In this case, firm j's SR profits at either Qj* or 0 are negative and equal to -TFC and firm j is said to be at its SR shutdowm point. That is, j's SR profits at either Qj* or 0 output = -TFC. Case 4) If the market price Pmkt is less than the minimum of the AVC curve, then firm j maximizes its SR profits (i.e., minimizes its SR losses), at 0 (zero) output. If Qj' is the quantity that satisfies MR = MC, then j's SR loss at Qj'is greater than its SR loss at 0 output, which is equal to -TFC. Thus, the loss (negative profits) are minimized at 0 instead of at the quantity where MR = MC.That is, j's SR profits at Qj' < j's SR profits at 0 output = -TFC < 0. Introduction Market Equilibrium in the Long Run Changes in Supply, Demand and Market Equilibrium The Aggregate Demand and Aggregate Supply Model A Firm's Long Run Average Cost Curve Macroeconomic Phenomena in the AD/AS Model Profit Maximization for a Competitive Firm Economic Policy Tools