Saturday, December 12, 2009

Two-Minute Drill Total Revenue and Cost Curves

Summary: Total revenue and total cost questions for review.

All answers are "true".

Students often do not understand why marginal revenue equals marginal cost maximizes profit. This graph shows that the distance between total revenue and total cost is the greatest so profit is the greatest. At point Q1, the slopes of both the TR and TC curves are equal so MR = MC.

The TC curve intersects the Y-axis at a point higher than zero. The firm has both fixed and variable costs.

As more workers are hired, workers become specialized and fixed costs are spread out over a larger amount of output. As a result, the TC curve becomes flatter.

About the Author: Mike Fladlien is an AP Economics teacher from Muscatine High School in Muscatine, IA.


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