MC ATC a) Find the total profit or total loss of the firm...

MC ATC a) Find the total profit or total loss of the firm shown in Figure 9. (b) Is the firm in the short run or the long run? (c) How much is the firm's most efficient output? (d) What is the lowest price the firm would accept in the long run? (LO 21-5, 21-6, 21-7) FIGURE 9 Price ($) D, MR 0 10 20 30 40 50 60 70 80 90 100 Output page 610

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00:01 So here we've got a whole bunch of information about a firm, right? and we are thinking about price and quantity.

00:09 We have a very flat demand curve, and that induces a fairly flat marginal revenue curve.

00:15 We've got marginal cost, which looks something like this.

00:19 And we have average total cost, which i better be careful, looks something like this.

00:24 I think that's a pretty good replication.

00:26 So a, first of all, to max profit, the firm is going to set marginal revenue equals to marginal cost.

00:37 So the initial output is going to be here.

00:39 And if you squint at that diagram, unfortunately, it's not an integer, right? it looks approximately to me like 8 .6, if i have to eyeball it, but it's clearly not on a line.

00:53 So i guess they're not super concerned about you hitting it on the nose.

00:57 Then once you get the quantity of 8 .6, you use that to think about what the price will be, right? and the price at 8 .6 looks to me like it's going to be 13 .5.

01:12 So 13 .5.

01:14 And then we need average total cost at that quantity as well.

01:19 So i think about what the average total cost is here.

01:23 And at 8 .6, that looks like 13.

01:28 And that means that the profit is equal to price minus average total cost times quantity...

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