1. (1) (C) P ($/unit) (A) P (B) P P1 P1 P1 TR TC q1 Q q1 Q q1 Q (2) Q P P
MR-MC is the point of maximum profit or minimum loss, if the firm continues to operate
(C) P
($/unit)
(A) P
(B) P
TR – TC = Economic Profit MC MC MC P1
D=MR
=AR P1 P1
D=MR
=AR
D=MR
=AR
ATC
ATC
ATC
ATC1
ATC1
AVC TR TC
AVC
AVC q1 Q q1 Q q1 Q
(2)
Normal Profit
(TR – TC = Zero
Economic Profit) Q P P P
($/unit) MC MC MC
Breakeven
Point
ATC
ATC
ATC
ATC2=
ATC2= P2 P2 P2
D=MR
=AR
D=MR
=AR
D=MR
=AR TR TC
AVC
AVC
AVC q2 Q q2 Q q2 Q

2. (3) P P P ($/unit) P3 P3 P3 TR TC q3 q3 q3 Q Q Q (4)
TR-TC = Economic Loss P
($/unit) MC MC MC
ATC
ATC
ATC
ATC3
ATC3 P3 P3 P3
D=MR=AR
D=MR=AR
D=MR=AR
AVC
AVC
AVC TR TC q3 q3 q3 Q Q Q
(4)
P<AVC; Shut Down (TR<VC, so loss is smaller by not even operating) P
($/unit) P P MC MC MC
ATC
ATC
ATC
Shutdown
Point
AVC
AVC
AVC P4 P4 P4
D=MR=AR
D=MR=AR
D=MR=AR Q Q Q