1. Cost and Revenue Analysis

7. Deriving a firm’s AR and MR: price-taking firm O O Price (£) AR, MR (£) P e S D D = AR = MR Q (millions) Q (hundreds) (a) The market (b) The firm

8. Total revenue for a price-taking firm TR TR (£) Quantity Quantity (units) 0 200 400 600 800 1000 1200 Price = AR = MR (£) 5 5 5 5 5 5 5 TR (£) 0 1000 2000 3000 4000 5000 6000

10. AR and MR curves for a firm facing a downward-sloping demand curve Q (units) 1 2 3 4 5 6 7 P =AR (£) 8 7 6 5 4 3 2 TR (£) 8 14 18 20 20 18 14 MR (£) 6 4 2 0 -2 -4 MR AR, MR (£) Quantity AR

12. TR curve for a firm facing a downward-sloping D curve TR Quantity TR (£) Quantity (units) 1 2 3 4 5 6 7 P = AR (£) 8 7 6 5 4 3 2 TR (£) 8 14 18 20 20 18 14

14. AR and MR curves for a firm facing a downward-sloping demand curve AR, MR (£) Quantity MR AR Elasticity = -1 Elastic Inelastic

15. TR curve for a firm facing a downward-sloping D curve TR Elastic Inelastic Quantity TR (£) Elasticity = -1

17. Finding maximum profit using total curves TR, TC, T  (£) TR TC Quantity

19. Finding maximum profit using total curves TR, TC, T  (£) T  TR TC a b c d Quantity

20. Finding maximum profit using total curves TR, TC, T  (£) T  TR TC Quantity d e f

22. Finding the profit-maximising output using marginal curves Quantity Costs and revenue (£) MR MC e Profit-maximising output

24. Measuring the maximum profit using average curves T O T A L P R O F I T MR Quantity Costs and revenue (£) MC AC AR Total profit = £1.50 x 3 = £4.50 6.00 4.50 b a

26. Loss-minimising output O Costs and revenue (£) Quantity LOSS MC AC AR MR Q AC AR

28. The short-run shut-down point O Costs and revenue (£) Quantity AR AVC AC P = AVC Q