Cost Curve Example

1 / 14

# 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.

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.

## PowerPoint Slideshow about ' Cost Curve Example' - meli

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Cost Curve Example

ATC

30

MC

AFC

25

20

AVC

15

10

5

0

5

10

15

20

25

30

35

MR

PRICE

QUANTITY

Cost Curve Example

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

What is TR?

ATC

30

MC

AFC

25

20

AVC

15

10

5

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

TR= Grey Area

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

What is TC?

ATC

30

MC

AFC

25

20

AVC

15

10

5

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

TC = Red Area

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

What area shows Economic Profits?

ATC

30

MC

AFC

25

20

AVC

15

10

5

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

Economic Profits = Green Area

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

What is the Breakeven Price and Quantity?

ATC

30

MC

AFC

25

20

AVC

15

10

5

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

Breakeven Price and Quantity = Pink Lines

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

What is the Shutdown Price and Quantity?

ATC

30

MC

AFC

25

20

AVC

15

10

5

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

Shutdown Price and Quantity = Turquoise Lines

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

What is the Supply Curve?

ATC

30

MC

AFC

25

20

AVC

15

10

5

MR

PRICE

0

5

10

15

20

25

30

35

QUANTITY

Supply Curve = Lime Green Line

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