11Total economic PROFIT ($7.88 x 8 = $63) $80$70MC$60$56DPrice$50Total economic PROFIT ($7.88 x 8 = $63)$48.1ATC$40AVC$30$20$10AFC12345678910Quantity
12Always proceed until MC = MR Marginal Cost = Marginal Revenue That is when you maximize your profit!
13And get this…for a firmwhen Price equals Demand and equals Marginal RevenueAnd price equals marginal cost,then quantity demanded equals quantity supplied!!!That’s why supply meets demand in equilibrium!Oh! My Gosh! It all comes together – I could just jump for joy
14Questions coming up … What if price drops below ATC minimum? What if price drops below AVC minimum?Will a change in fixed cost affect output?Will a change in variable cost affect output?And why is that marginal cost curve decreasing and the increasing anyway?