ECON 101 Study Guide - Quiz Guide: Playstation 3, American Airlines, Fixed Cost
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For the pizza seller whose marginal, average variable and average total cost curves are shown in the diagram, Firms should always charge at a price that is equal to their marginal cost. If p>atc>avc, the firm operates with a profit. If atc>p>avc, the firm still operates but with a loss-the operation can cover part of its fixed cost. If atc>avc>p, the firm should shut down as it cannot even cover part of its fixed cost. To maximize profit, the firm will produce 500 slices of pizza a day. At 500 slices of pizza per day, the difference between the marginal cost and the average total cost is maximized. Think about the demand for the three popular game consoles: xbox, ps3, and wii. An xbox and an xbox gam are complements. When the price of an xbox falls, consumers respond by increasing the quantity of xboxes demanded so the equilibrium quantity of.
