by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How are Short-Run Decisions Based Upon Costs made in a Perfectly Competitive Market? The average cost and average variable cost curves divide the marginal cost curve into three segments. At the market price, which the perfectly competitive firm accepts as given, the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How Does the Production Function Estimate Inputs? We’ve explained that a firm’s total costs depend on the quantities of inputs the firm uses to produce its output and the cost of those inputs to the firm. The firm’s production function tells us how much output the...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Shutdown Point on The Cost Curve? Shutting down can reduce variable costs to zero, but in the short run, the firm has already paid for fixed costs. As a result, if the firm produces a quantity of zero, it would still make losses because it would still need...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Break Even Point on the Cost Curve? Again, the perfectly competitive firm will choose the level of output where Price = MR = MC. At this price and output level, where the marginal cost curve is crossing the average cost curve, the price the firm receives...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does Average total Cost Relate to Profit Margin? Does maximizing profit (producing where MR = MC) imply an actual economic profit? The answer depends on the relationship between price and average total cost, which is the average profit or profit margin. If the...
