Maximizing Profit and the Average Cost Curve

Being able to predict your company’s profit is a very useful tool. In this video, we introduce the third concept you need to maximize profit - average cost. When looked at in conjunction with the marginal revenue and marginal cost, the average cost curve will show you how to accurately predict how much profit you can make!
The usefulness of these tools does not stop there. Sometimes, you can’t make a profit. You’ll have to take a loss. These tools can also show you how to minimize losses, and make decisions on whether a company should enter or exit an industry.
We also define terms such as zero profits and sunk costs in this video.
Microeconomics Course: bit.ly/20VablY
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[@Elmina_]

Thank you so much this was the best explanation I have ever seen. It was quite comprehensible. :)

[@mundheral.askari3450]

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[@marishaghosh6611]

I'm gonna take up economics in college and was clearing some basic concepts. This really helped, thanks a lot!

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How’s it going?

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Very well explained, many thanks.

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[@gregoirelecomte1007]

This is so clear and well made. Congrats! Very helpful

[@gregoirelecomte1007]

And thank you

[@yogeshkumarchaudhary5681]

great work.

[@john_mckinney]

Thanks for the explaination. Question: why would a firm exit if the expected price was below AC for an extended time? Wouldn’t it still maximize profits (minimize loss) as long as price was above MC and therefore keep producing?

[@loganwashere24]

Bring the economics lady back!

[@aliciaflorrick6359]

Great video! From where do you source the data to determine whether to enter or exit

[@murangigichovi8058]

Goood stuff keep it up!

[@grantgibson9645]

Suppose that the market price for a good is $15 and the MC curve goes through $15 at 2 different Quantities. Ex: The curve starts at $20 and goes down to $12 (passes through 15) and then goes up to $40 (passes through 15). Would I want to produce the quantity that is at $15 when it is going down, or when it goes back up?

[@andreasaristeidou5647]

Good to know that Zero Profits is basically "normal" profits because up until this video it didn't make sense!

[@assartsandcrafts8723]

How to show profit condition under perfect competitive market without using average cost curve??

[@sivonparansun]

Zero Profits =maximize?

[@felixzhang9455]

yes because of opportunity cost.

[@jesusosegueda422]

Yes, but that is on the long run. If there is perfect competition, and some firms are making a profit, in the long run, other firms will enter the industry. This is an increase in supply (the whole curve). That will make the price go down, for many of these companies will agree to sell at a lower price in order to sell more. Eventually, firms stop entering the industry when the price is such that there are no profits for no firm.

[@crocop1582]

@@jesusosegueda422 In perfect competition the market price(Industry=Price Maker) where Minority of Sellers or Buyers cannot impact on the Price and so the price remains same for homogeneous products. When Firms are making profit on a given market price producing a homogeneous product,New firms enter to make profit seeing P>AC and new entries will be there till P=minAC and that will be the Zero Profit or Normal Profit for Long Run of an industry.

[@woahzuh532]

zero *economic* profit, which takes into account total costs (implicit and explicit - opportunity costs). economists calculate profit differently than accountants

[@valeriecorrea6368]

hh99