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MR Cost Curve Example 5 10 15 20 25 30 5101520253035 0 MC ATC AFC AVC What is your level of production if your price is 25? PRICE QUANTITY.

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Presentation on theme: "MR Cost Curve Example 5 10 15 20 25 30 5101520253035 0 MC ATC AFC AVC What is your level of production if your price is 25? PRICE QUANTITY."— Presentation transcript:

1 MR Cost Curve Example MC ATC AFC AVC What is your level of production if your price is 25? PRICE QUANTITY

2 MR Cost Curve Example MC ATC AFC AVC What is your level of production if your price is 25? REMEMBER: Profit Max occurs where MC=MR=P PRICE QUANTITY

3 MR What is TR? MC ATC AFC AVC PRICE QUANTITY

4 MR TR= Grey Area MC ATC AFC AVC Grey Area: TR= Price * Q PRICE QUANTITY

5 MR What is TC? MC ATC AFC AVC PRICE QUANTITY

6 MR TC = Red Area MC ATC AFC AVC Red area: TC = ATC x Q PRICE QUANTITY

7 MR MC ATC AFC AVC What area shows Economic Profits? PRICE QUANTITY

8 MR MC ATC AFC AVC Economic Profits = Green Area Green Area Economic Profits = TR - TC PRICE QUANTITY

9 MR MC ATC AFC AVC What is the Breakeven Price and Quantity? PRICE QUANTITY

10 MR MC ATC AFC AVC Breakeven Price and Quantity = Pink Lines Its the price that just covers total costs TR = TC implies economic profits are zero Minimum ATC PRICE QUANTITY

11 MR MC ATC AFC AVC What is the Shutdown Price and Quantity? PRICE QUANTITY

12 MR MC ATC AFC AVC Shutdown Price and Quantity = Turquoise Lines Its the price that just covers total variable costs Minimum AVC PRICE QUANTITY

13 MR MC ATC AFC AVC What is the Supply Curve? PRICE QUANTITY

14 MR MC ATC AFC AVC Supply Curve = Lime Green Line MC curve above the AVC PRICE QUANTITY


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