Using Graphs That Show ATC, AVC, MC, P and MR

question 75

Essay

Using graphs that show ATC, AVC, MC, P and MR, show the profit maximizing situation for a firm that is experiencing:
a. short-run economic profits greater than zero. What will happen in the long run?
b. short-run losses where P < ATC but P > AVC. What will happen in the long run?
c. losses where P < minimum AVC. What will happen in the short run?

---

Definitions:

Exclusive Franchise

A licensing agreement giving a single franchisee the right to be the only provider of the franchisor's product or service in a specific geographical area.

Variable Selling

Variable selling refers to the costs associated with selling products that vary with the level of sales activities, such as commissions and shipping expenses.

Administrative Expense

Costs related to the general operation of a business, including executive salaries, legal and financial fees, and other overhead costs.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales activities.