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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
cost curve example
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 example1
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

REMEMBER:

Profit Max occurs where MC=MR=P

MR

PRICE

QUANTITY

what is tr
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
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
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
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

slide7

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

slide8

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

slide9

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

slide10

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

slide11

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

slide12

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

slide13

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

slide14

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

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