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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

How does the average cost curve help to show whether a firm is making profits or losses?

To determine

How the average cost curve helps to show whether the firm is making profits or losses.

Explanation

A firm in a perfectly competitive market will decide to continue only if it is making normal profits. In this market, the average cost curve will show whether the firm is making profits or losses.

If the average cost curve is below the marginal cost curve, or the prevailing price at the level of quantity, we can conclude that the firm is making profits. This is simple to understand...

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