Increase/ decrease the market unit price—corresponding to the firm’s marginal revenue—to observe how the firm adjusts the quantity it produces, Q* according to the equilibrium price P*.

You can also notice the impact of market fluctuations on the firm’s profit. In a perfectly competitive market, when the market demand for a good changes, the price of this good is affected, thus increasing or reducing the difference between the firm’s marginal revenue (unit price) and its average cost that jointly determine how much profit the firm will make.

As a reminder, Firm Profit \π=[Unit Price(MR) * Q produced] - [Average Cost * Q produced]\

Use the sliders on the left to increase or decrease the firm’s Fixed Cost and Marginal Cost and observe the result of these shifts on the firm’s profit.

When average cost is equal or greater than the market unit price, the firm makes no profit. On the opposite, when the market unit price is greater than average cost curve, the firm makes positive profits(supernormal profits).

You can also notice the impact of market fluctuations on the firm’s profit. In a perfectly competitive market, when the market demand for a good changes, the price of this good is affected, thus increasing or reducing the difference between the firm’s marginal revenue (unit price) and its average cost that jointly determine how much profit the firm will make.