Profit Maximization - AP Microeconomics

Total Cost = $1000. $$TC = ATC \times Q = $20 \times 50 = $1000$$

P < AVC. Firm shuts down when price cannot cover variable costs.

Profit = $100. Direct calculation: $1500 - $1400 = $100.

P > ATC. Price above average total cost generates economic profit.

Total Cost = $1000. $$TC = ATC \times Q = $20 \times 50 = $1000$$

Break-even. $ \text{Total revenue} = \text{total cost} $ at break-even.

MR = MC. Same rule applies to monopolists for profit maximization.

P > AVC. Price covers variable costs, minimizing short-run losses.

Profit per unit = Price - ATC. Profit margin per unit sold.

MR > MC. Additional revenue exceeds additional cost, increasing profit.

Sum of total fixed cost and total variable cost. Total cost equals fixed plus variable costs.

P < AVC. Price below variable cost per unit requires shutdown.

Profit = Total Revenue - Total Cost. Basic profit equation subtracting all costs from revenue.

Costs that vary with output. Variable costs change with the level of output.

MR = MC. Same profit maximization rule applies in monopolistic competition.

TR = TC including opportunity costs. Revenue equals all costs including opportunity costs.

MR = MC. Marginal revenue equals marginal cost at profit maximum.

Cost of producing an additional unit. Additional cost incurred to produce one more unit.

MC = ATC. $MC$ curve intersects $ATC$ at its minimum point.

$Total Revenue = Price \times Quantity$. Revenue equals price multiplied by units sold.

Marginal Cost curve above AVC. Firm supplies where $MC \geq AVC$ to cover variable costs.

$MR = \frac{\text{Change in Total Revenue}}{\text{Change in Quantity}}$. Additional revenue from selling one more unit.

P < AVC. Firm shuts down when price cannot cover variable costs.

Profit = $100. Simple subtraction: $500 - $400 = $100.

AR = MR. In perfect competition, price equals both average and marginal revenue.

$ATC = \frac{\text{Total Cost}}{\text{Quantity}}$. Total cost divided by quantity produced.

Do not produce. Price below $AVC$ means losses exceed variable costs.

Total Revenue > Total Cost including opportunity costs. Profit above normal return including all opportunity costs.

Output where MR = MC. Profit maximized where additional revenue equals additional cost.