0
$\begingroup$

AC and MC cost curves

This graph indicates Marginal cost (MC) and Average cost (AC) curves to obtain customers. AC is increasing because MC is increasing. It is seen that the decreasing return to scale because MC has higher slope than the AC.

Presume firms are maximizing long-run profit, the price is given by the market, and there are no barriers to entry. MC and AC curves are increasing, what is the optimal number of customers?

With above rules, to be in profit, Price must be higher than AC. In addition, the Price must equal to MC for maximizing long-run profit. Because the price is given by the market, it is constant.

In this case, how do optimal number of customers is calculated?

Improve this question
$\endgroup$

1 Answer 1

Reset to default
0
$\begingroup$

I think that at the point that Price=MC, we obtain optimal customers.

Improve this answer
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.