Manufacturing — Cost Curves & Profit Analysis
📋 Text description of graph (for screen readers)
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| Variable | Value | Interpretation |
|---|---|---|
| Market Price (P) | — | Given by the market; firm is a price taker |
| Quantity (Q) | — | Chosen by the firm |
| Marginal Cost (MC) | — | Cost of last unit produced |
| Avg. Total Cost (ATC) | — | Total cost per unit |
| Avg. Variable Cost (AVC) | — | Variable cost per unit |
| Economic Profit | — | = (P − ATC) × Q |
| Optimal Q (P = MC) | — | Profit-maximizing quantity |
📚 Key Decision Rules
- Profit maximization: Set Q where P = MC (and MC is rising)
- Short-run operation: Produce if P ≥ min AVC
- Short-run shutdown: Stop if P < min AVC (losses exceed fixed costs)
- Long-run exit: Exit if P < min ATC (persistent economic losses)