and total cost is $165, for overall losses of $75. If the farm shuts down, it must pay only its fixed costs of $62.

Shutting down is preferable to selling at a price of $1.50 per pack.

Looking at Table 8.6, if the price falls below about $1.72, the minimum average variable cost, the firm must

shut down.

Quantity

Average Variable Cost

Average Cost

Marginal Cost

Q

AVC

AC

MC

0

10

20

30

40

50

60

70

80

90

100

110

120

-

$2.80

$2.40

$2.13

$1.90

$1.76

$1.72

$1.83

$2.10

$2.60

$3.38

$4.44

$5.44

-

$9.00

$5.50

$4.20

$3.45

$3.00

$2.75

$2.71

$2.88

$3.29

$4.00

$5.00

$5.96

-

$2.80

$2.00

$1.60

$1.20

$1.20

$1.50

$2.50

$4.00

$6.60

$10.40

$15.00

$31.50

TABLE 8.6 Cost of Production for the Raspberry Farm
200 8 • Perfect Competition

The intersection of the average variable cost curve and the marginal cost curve, which shows the price below
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