econs question

ECONS QUESTION (posted as it can't really fit into the hw section)

Production and Cost Exercise

Draw the AC, AVC, MC, AR and MR curves for a situation where the firm is experiencing supernormal profit. Label both the axis.

1. Why are the AC and AVC curves shaped in that way? Explain.
2. If the firm is to experience subnormal profit, how should the AR and MR curves be drawn? (illustrate with a different coloured pen.)
3. Which 2 curves can the MC curve be derived from?
4. Give the equation which illustrates normal profit being made.



-- lois