00:01
Let's talk about when a firm should leave the market.
00:06
Let's say, for example, that someone says, well, the firm should leave the market whenever they start making losses.
00:13
Well, that answer would be incorrect.
00:20
So let's think about it this way.
00:23
Whenever the price is below the average total cost curve, you are technically making losses.
00:31
But that doesn't mean that you should stop production.
00:35
Because even though you're making losses, don't forget that profits are calculated based on an opportunity cost and explicit costs.
00:49
So even though you're making less than the average total cost, right, which is not taking, sorry, which is incorporated by the fixed cost and the variable cost, those fixed costs can, again, these start to go down as you increase quantity...