Transcript Slide 1
Perfect Competition Cost Curve Collection Slides 2-5 depict a perfectly competitive market and a firm in that market. The progression from slide 2 through 4 show the areas of total revenue (TR), total cost (TC), and profit. Slides 6-9 illustrate a decrease in demand and how the new market price reduces TR and causes the firm to operate at a loss. The decrease drives the price below the ATC of the firm, which decreases total revenue and produces a loss for the firm. The firm is covering its variable costs and part of its fixed costs. Slides 10-13 illustrates a further decrease in demand, reducing the price for the firm to a point below the AVC curve. The slides indicate even greater loss. At this point, the firm will shut down to minimize losses, but it will still be obligated to its fixed costs. Slides 14-30 could be considered a set. The curves in slides 15-29 are based on the table in slide 14. The table could be printed so that students would have it handy while viewing the graphs. For best results, print the table in "landscape" orientation. Perfect Competition The Industry Price The Firm Price S MC P ATC P D=MR AVC 0 D Q Quantity Q Quantity Perfect Competition The Industry Price The Firm Price S MC P ATC P D=MR AVC 0 D Q Quantity Q Total Revenue Quantity Perfect Competition The Industry Price The Firm Price S MC P ATC P D=MR AVC 0 D Q Q Quantity Total Revenue Total Cost Quantity Perfect Competition The Industry Price The Firm Price S MC P ATC P D=MR AVC 0 D Q Q Quantity Quantity Total Revenue Total Cost Profit Perfect Competition The Industry The Firm Price Price S MC ATC 0 P AVC 1 P P D=MR 0 D 1 D Q 1 Q 0 Quantity Q Quantity Perfect Competition The Industry The Firm Price Price S MC ATC 0 P AVC 1 P P D=MR 0 D 1 D Q 1 Q 0 Quantity Q Total Revenue Quantity Perfect Competition The Industry The Firm Price Price S MC ATC 0 P AVC 1 P P D=MR 0 D 1 D Q 1 Q 0 Quantity Q Total Revenue Total Cost Quantity Perfect Competition The Industry The Firm Price Price S MC ATC 0 P AVC 1 P P D=MR 0 D 1 D Q 1 Q 0 Quantity Q Quantity Total Revenue Total Cost Loss Perfect Competition The Industry The Firm Price S Price MC ATC AVC 0 P 1 P P 1 D Q 1 Q D=MR 0 D 0 Quantity Q Quantity Perfect Competition The Industry The Firm Price S Price MC ATC AVC 0 P 1 P P 1 D Q 1 Q D=MR 0 D 0 Quantity Q Total Revenue Quantity Perfect Competition The Industry The Firm Price S Price MC ATC AVC 0 P 1 P P 1 D Q 1 Q D=MR 0 D 0 Quantity Q Total Revenue Total Cost Quantity Perfect Competition The Industry The Firm Price S Price MC ATC AVC 0 P 1 P P 1 D Q 1 Q D=MR 0 D 0 Quantity Q Quantity Total Revenue Total Cost Loss Perfect Competition Quantity of chairs per hour TC FC VC MC AFC AVC ATC 0 30 30 0 1 45 30 15 15.00 30.00 15.00 45.00 2 55 30 25 10.00 15.00 14.50 27.50 3 63 30 33 8.00 10.00 11.00 21.00 4 70 30 40 7.00 7.50 10.00 17.50 5 80 30 50 10.00 6.00 10.00 16.00 6 100 30 70 20.00 5.00 11.67 16.67 7 130 30 100 30.00 4.28 14.28 18.57 Perfect Competition Costs in $s 110 100 90 80 70 60 50 40 30 20 10 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition Costs in $s 110 TC TC=Total Cost 100 90 80 70 60 50 40 30 20 10 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition Costs in $s 110 TC TC=Total Cost 100 90 80 70 60 50 40 30 20 10 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition Costs in $s 110 TC TC=Total Cost 100 FC=Fixed Cost 90 80 70 60 50 40 30 FC 20 10 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition Costs in $s 110 TC TC=Total Cost 100 FC=Fixed Cost 90 80 70 60 50 40 30 FC 20 10 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition Costs in $s 110 TC VC 100 90 TC=Total Cost VC=Variable Cost FC=Fixed Cost 80 70 60 50 40 30 FC 20 10 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition Costs in $s 110 TC VC 100 90 TC=Total Cost VC=Variable Cost FC=Fixed Cost 80 70 60 50 40 30 FC 20 10 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition Costs in $s 60 50 40 30 20 10 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition MC=Marginal Cost Costs in $s 60 50 40 MC 30 20 10 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition MC=Marginal Cost Costs in $s 60 50 40 MC 30 20 10 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition MC=Marginal Cost Costs in $s 60 AFC=Average Fixed Cost 50 40 MC 30 20 10 AFC 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition MC=Marginal Cost Costs in $s 60 AFC=Average Fixed Cost 50 40 MC 30 20 10 AFC 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition MC=Marginal Cost Costs in $s AVC=Average Variable Cost AFC=Average Fixed Cost 60 50 40 MC 30 20 AVC 10 AFC 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition MC=Marginal Cost Costs in $s AVC=Average Variable Cost AFC=Average Fixed Cost 60 50 40 MC 30 20 AVC 10 AFC 1 2 3 4 5 6 7 Quantity (chairs per hour) Perfect Competition MC=Marginal Cost ATC=Average Total Cost AVC=Average Variable Cost AFC=Average Fixed Cost Costs in $s 60 50 40 MC 30 ATC 20 AVC 10 AFC 1 2 3 4 5 6 7 Quantity (chairs per hour)