Perfect Competition
Cost Curve Collection
Slides 2-5 depict a perfectly competitive market and a firm in that market. The progression from slide 2 through 4 show the areas of
total revenue (TR), total cost (TC), and profit.
Slides 6-9 illustrate a decrease in demand and how the new market price reduces TR and causes the firm to operate at a loss. The
decrease drives the price below the ATC of the firm, which decreases total revenue and produces a loss for the firm. The firm is
covering its variable costs and part of its fixed costs.
Slides 10-13 illustrates a further decrease in demand, reducing the price for the firm to a point below the AVC curve. The slides
indicate even greater loss. At this point, the firm will shut down to minimize losses, but it will still be obligated to its fixed costs.
Slides 14-30 could be considered a set. The curves in slides 15-29 are based on the table in slide 14. The table could be printed so
that students would have it handy while viewing the graphs. For best results, print the table in "landscape" orientation.
Perfect Competition
The Industry
Price
The Firm
Price
S
MC
P
ATC
P
D=MR
AVC
0
D
Q
Quantity
Q
Quantity
Perfect Competition
The Industry
Price
The Firm
Price
S
MC
P
ATC
P
D=MR
AVC
0
D
Q
Quantity
Q
Total Revenue
Quantity
Perfect Competition
The Industry
Price
The Firm
Price
S
MC
P
ATC
P
D=MR
AVC
0
D
Q
Q
Quantity
Total Revenue
Total Cost
Quantity
Perfect Competition
The Industry
Price
The Firm
Price
S
MC
P
ATC
P
D=MR
AVC
0
D
Q
Q
Quantity
Quantity
Total Revenue
Total Cost
Profit
Perfect Competition
The Industry
The Firm
Price
Price
S
MC
ATC
0
P
AVC
1
P
P
D=MR
0
D
1
D
Q
1
Q
0
Quantity
Q
Quantity
Perfect Competition
The Industry
The Firm
Price
Price
S
MC
ATC
0
P
AVC
1
P
P
D=MR
0
D
1
D
Q
1
Q
0
Quantity
Q
Total Revenue
Quantity
Perfect Competition
The Industry
The Firm
Price
Price
S
MC
ATC
0
P
AVC
1
P
P
D=MR
0
D
1
D
Q
1
Q
0
Quantity
Q
Total Revenue
Total Cost
Quantity
Perfect Competition
The Industry
The Firm
Price
Price
S
MC
ATC
0
P
AVC
1
P
P
D=MR
0
D
1
D
Q
1
Q
0
Quantity
Q
Quantity
Total Revenue
Total Cost
Loss
Perfect Competition
The Industry
The Firm
Price
S
Price
MC
ATC
AVC
0
P
1
P
P
1
D
Q
1
Q
D=MR
0
D
0
Quantity
Q
Quantity
Perfect Competition
The Industry
The Firm
Price
S
Price
MC
ATC
AVC
0
P
1
P
P
1
D
Q
1
Q
D=MR
0
D
0
Quantity
Q
Total Revenue
Quantity
Perfect Competition
The Industry
The Firm
Price
S
Price
MC
ATC
AVC
0
P
1
P
P
1
D
Q
1
Q
D=MR
0
D
0
Quantity
Q
Total Revenue
Total Cost
Quantity
Perfect Competition
The Industry
The Firm
Price
S
Price
MC
ATC
AVC
0
P
1
P
P
1
D
Q
1
Q
D=MR
0
D
0
Quantity
Q
Quantity
Total Revenue
Total Cost
Loss
Perfect Competition
Quantity
of chairs
per hour
TC
FC
VC
MC
AFC
AVC
ATC
0
30
30
0
1
45
30
15
15.00
30.00
15.00
45.00
2
55
30
25
10.00
15.00
14.50
27.50
3
63
30
33
8.00
10.00
11.00
21.00
4
70
30
40
7.00
7.50
10.00
17.50
5
80
30
50
10.00
6.00
10.00
16.00
6
100
30
70
20.00
5.00
11.67
16.67
7
130
30
100
30.00
4.28
14.28
18.57
Perfect Competition
Costs in $s
110
100
90
80
70
60
50
40
30
20
10
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
Costs in $s
110
TC
TC=Total Cost
100
90
80
70
60
50
40
30
20
10
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
Costs in $s
110
TC
TC=Total Cost
100
90
80
70
60
50
40
30
20
10
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
Costs in $s
110
TC
TC=Total Cost
100
FC=Fixed Cost
90
80
70
60
50
40
30
FC
20
10
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
Costs in $s
110
TC
TC=Total Cost
100
FC=Fixed Cost
90
80
70
60
50
40
30
FC
20
10
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
Costs in $s
110
TC
VC
100
90
TC=Total Cost
VC=Variable Cost
FC=Fixed Cost
80
70
60
50
40
30
FC
20
10
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
Costs in $s
110
TC
VC
100
90
TC=Total Cost
VC=Variable Cost
FC=Fixed Cost
80
70
60
50
40
30
FC
20
10
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
Costs in $s
60
50
40
30
20
10
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
MC=Marginal Cost
Costs in $s
60
50
40
MC
30
20
10
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
MC=Marginal Cost
Costs in $s
60
50
40
MC
30
20
10
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
MC=Marginal Cost
Costs in $s
60
AFC=Average Fixed Cost
50
40
MC
30
20
10
AFC
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
MC=Marginal Cost
Costs in $s
60
AFC=Average Fixed Cost
50
40
MC
30
20
10
AFC
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
MC=Marginal Cost
Costs in $s
AVC=Average Variable Cost
AFC=Average Fixed Cost
60
50
40
MC
30
20
AVC
10
AFC
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
MC=Marginal Cost
Costs in $s
AVC=Average Variable Cost
AFC=Average Fixed Cost
60
50
40
MC
30
20
AVC
10
AFC
1
2
3
4
5
6
7
Quantity (chairs per hour)
Perfect Competition
MC=Marginal Cost
ATC=Average Total Cost
AVC=Average Variable Cost
AFC=Average Fixed Cost
Costs in $s
60
50
40
MC
30
ATC
20
AVC
10
AFC
1
2
3
4
5
6
7
Quantity (chairs per hour)