Economics Question. What happens when MC=ATC?

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So in perfect competition, for short run profit. What will happen when MC=ATC, is that the break even point? Can someone please explain with detail?Thx

Dana Herzog · Accepted Answer

MC=ATC when ATC is minimized. This point is called the break even point. The profit will be zero. When price goes up, MC=MR=P will generate profits. But when price goes down, MC=MR=P will be a loss. If the price goes down further, less than the average variable cost, the producer will shut down and go out of the market.

Dana Herzog · Answer

Atc And Mc

Dana Herzog · Answer

Marginal Cost is defined as the change in total cost over the change in quantity; or how much it costs a firm to produce an additional unit. In contrast, average total cost is defined as the sum of the firm’s average variable cost and average fixed cost of production. Ideally a firm would like to produce at the level its marginal cost equaled its average total cost–that is the firm earns its optimal level of profit where MC=ATC. At this level of production the firms earns profit on all units produced under the point MC=ATC. For example; if a factory that produced widgets had an ATC of producing 100 units @ 6 dollars/widget, then if its MC were also 6 dollars/widget the firm would generate profit on 99 of those units and break even on the last unit. This would be the firm’s optimal profit given these constraints. If for instance, the firm chose to produce at the level its marginal cost equaled 5 dollars/widget, it would be neglecting all the profit it could make on those additional units that were less expensive than its average variable cost.

Dana Herzog · Answer

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Dr. Katlynn Swaniawski II

Economics Question. What happens when MC=ATC?

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