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Economics Model Answers Thirteen (view source)
Revision as of 17:39, May 20, 2007
, 17:39, May 20, 2007no edit summary
<br>How much profit is it making at a price of P2?
<br>How much profit is it making at a price of P2?
'''The firm should shut down because P<ATC and P<AVC. At the higher price P2, the firm would be making zero profit but would stay in business because it can pay salaries.'''
'''The firm should shut down because when P<P1, then P<ATC and P<AVC.'''
'''At the higher price P2, the firm would be making zero overall profit but would stay in business because P>AVC and is making marginal profits.'''
5. Look again at Figure B (right). Assume the firm is perfectly competitive. Explain what AFC is, and use the labels on the graph to describe its amount.
5. Look again at Figure B (right). Assume the firm is perfectly competitive. Explain what AFC is, and use the labels on the graph to describe its amount.