Chap006.6 - Profit-Maximizing Firms in Perfectly...

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6 Chapter 6: Perfectly Competitive Supply Slide 31 Profit-Maximizing Firms in Perfectly Competitive Markets ± Average Variable Cost and Average Total Cost z Short-run shutdown condition AVC P of value minimum < Chapter 6: Perfectly Competitive Supply Slide 32 Profit-Maximizing Firms in Perfectly Competitive Markets ± Average Variable Cost and Average Total Cost z Average Total Cost ² Total cost divided by total output Q TC Chapter 6: Perfectly Competitive Supply Slide 33 Profit-Maximizing Firms in Perfectly Competitive Markets ± Average Variable Cost and Average Total Cost z Profits = TR – TC or (P x Q) -( ATC x Q ) z To be profitable: P > ATC Chapter 6: Perfectly Competitive Supply Slide 34 Average Variable Cost and Average Total Cost of Bottle Production Employees per day 00 0 4 0 1 80 12 0.150 52 0.650 2 200 24 0.120 64 0.320 3 260 36 0.138 76 0.292 4 300 48 0.160 88 0.293 5 330 60 0.182 100 0.303 6 350 72 0.206 112 0.320 7 362 84 0.232 124 0.343 Bottles per day Variable cost ($/day) Average variable cost ($/unit of output) Total cost ($/day) Average
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