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# Cost Curve Example - PowerPoint PPT Presentation

Cost Curve Example. What is your level of production if your price is 25?. ATC. 30. MC. AFC. 25. 20. AVC. 15. 10. 5. 0. 5. 10. 15. 20. 25. 30. 35. MR. PRICE. QUANTITY. Cost Curve Example. What is your level of production if your price is 25?. ATC. 30. MC. AFC. 25. 20.

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Presentation Transcript

ATC

30

MC

AFC

25

20

AVC

15

10

5

0

5

10

15

20

25

30

35

MR

PRICE

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

0

5

10

15

20

25

30

35

REMEMBER:

Profit Max occurs where MC=MR=P

MR

PRICE

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

Grey Area: TR=

Price * Q

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

Red area: TC

= ATC x Q

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

Green Area Economic Profits

= TR - TC

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

It’s the price that just covers total costs

TR = TC implies economic profits are zero

Minimum ATC

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

It’s the price that just covers total variable costs

Minimum AVC

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

ATC

30

MC

AFC

25

20

AVC

15

10

5

MC curve above the AVC

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY