# AP Microeconomics 3.5, 3.6, and 3.7 Profit maximization

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marginal cost

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## Description and Tags

### 14 Terms

1

marginal cost

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2

marginal revenue

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3

MR is the

price

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4

Profit maximizing rule

MR=MC

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5

profit maximizing quantity in graph

intersection of MC and MR

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6

If the price is greater than ATC it means that

the firm is profiting

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7

If the price is less than ATC but greater than AVC it means that

the firms is losing but should NOT shut down

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8

If the price is les than ATC and AVC it means that

the firm is losing and should shut down

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9

profit formula

TR-TC ; tr=mr times q

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10

sunk cost

cost that has already been incurred and therefore should not play into the decision making process

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11

Perfect competition has

• many firms

• identical products

• price takers

• no barriers

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12

perfect competition on a graph: price

set by market

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13

perfect competition on a graph: set dotted line to

MR=D=AR=P

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14

perfect competition on a graph: firms will produce where

MR=MC

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