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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 Example. What is your level of production if your price is 25?. ATC. 30. MC. AFC. 25. 20.

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Cost Curve Example

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  1. 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

  2. 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

  3. What is TR? ATC 30 MC AFC 25 20 AVC 15 10 5 MR PRICE 0 5 10 15 20 25 30 35 QUANTITY

  4. 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

  5. What is TC? ATC 30 MC AFC 25 20 AVC 15 10 5 MR PRICE 0 5 10 15 20 25 30 35 QUANTITY

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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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