1- Draw the short-run ATC, AVC and MC curves for a business.

1- Draw the short-run ATC, AVC and MC curves for a business. Show the supply curve with the prices at which a firm would breakeven and shutdown. Label everything.

2- Show the price and quantity for a perfectly competitive firm that is making a loss in the short run. Also make sure to graph the marginal revenue, marginal, average total and average variable cost curves.

Solutions

Expert Solution

1. The shut-down point is the minimum SAVC. A firm will supply as long as its minimum SAVC is covered. This will minimize the economic loss as the fixed costs are already incurred.

Profit = Total Revenue (TR) – Total Cost (TC)

Profit per unit =Price per unit – ATC) x output.

When total costs exceeds total revenue, the competitive firm is making a loss.

Rahul Sunny answered 1 year ago

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