Cost and Revenue Curves draws a firm’s cost curves, marginal cost (MC), average total cost (ATC), average variable cost (AVC) and average fixed cost (AFC), all from one total cost, so MC always crosses AVC and ATC at their lowest points and the gap between ATC and AVC is AFC. Put the firm in a market: a perfectly competitive firm facing the price line D = MR = AR = P, making a profit or a loss, at its break-even or shutdown point, with the market’s supply and demand beside it; a monopoly producing where MR = MC, with consumer surplus, deadweight loss and regulated prices; or a monopolistically competitive firm in the short run or in long-run equilibrium with excess capacity.
Teachers use it for AP Microeconomics and economics questions on tests, worksheets and slides. Start from a common setup, like a firm at a loss that keeps producing or a regulated natural monopoly, then shape the costs by eye. The axes show shape only, as AP graphs are drawn, with dashed lines to Pₑ, qₑ and the other prices and quantities. Shade profit or loss, consumer surplus and deadweight loss, in color or hatched for black and white, and leave any label, or every label, as a blank line for students to fill in.
Copy the figure straight into a test, worksheet or slide, or download it as a PNG or SVG. Printing the page prints
just the figure. Share link copies the page’s address with your settings in it, so anyone who opens it sees this
exact figure, and presets save settings you use often in your browser. It’s free, with no sign-up.
Why does marginal cost cross ATC and AVC at their lowest points?
While the cost of the next unit (MC) is below an average, it pulls the average down; once MC is above it, it pulls the average up. So MC cuts AVC and ATC exactly at their lowest points, AVC’s first since ATC’s low point is further right, where falling AFC still offsets rising AVC. Every curve here comes from one total cost, so this always holds however you set the costs, and Dots where MC crosses AVC and ATC marks the two points.
How do you show profit or loss on a perfectly competitive firm graph?
The firm takes the market price as given, so its demand, marginal revenue and average revenue are one horizontal line, D = MR = AR = P, and it produces qₑ where P = MC. Profit or loss is the rectangle between the price and ATC at qₑ, out to qₑ: profit when the price is above ATC, loss when it is below. Choose Perfect competition, pick the Market price, and tick Profit or loss under Shading; tick The market beside the firm, setting the price for the side-by-side market and firm graphs AP questions ask for.
What is the difference between the break-even point and the shutdown point?
The break-even point is the lowest point of ATC: at that price the firm makes zero economic profit. The shutdown point is the lowest point of AVC: between the two the firm makes a loss but keeps producing in the short run, because it covers its variable costs and some of its fixed cost, and below the lowest AVC it shuts down and loses only its fixed cost. Both are marked and named on a perfect competition graph, and the Market price choices put the price above ATC, at either point, between them or below AVC.
How do you draw a monopoly graph with deadweight loss?
A monopoly faces the downward-sloping market demand, so its marginal revenue lies below demand (twice as steep for a straight-line demand). It produces QM where MR = MC and charges PM, read up from QM to demand; the deadweight loss is the triangle between demand and MC from QM out to where they cross, the output a competitive market would reach. Choose Monopoly or the Monopoly: profit and deadweight loss setup, and tick Consumer surplus and Deadweight loss under Shading.
How is a natural monopoly regulated?
A natural monopoly’s ATC is still falling where demand meets MC, so one firm can supply the market most cheaply. Regulated to the socially optimal price, P = MC, it produces the allocatively efficient quantity but the price is below ATC, so it makes a loss and needs a subsidy; at the fair-return price, P = ATC, it breaks even with a normal profit. Choose the Monopoly: regulated (P = MC, P = ATC) setup, or set Regulation to either price or Both, marked.
Why does a monopolistically competitive firm have excess capacity in the long run?
Short-run profits draw new firms in and losses drive firms out, shifting each firm’s demand until it just touches ATC, where the firm makes zero economic profit. Because demand slopes down, it touches ATC to the left of ATC’s lowest point, so the firm produces less than the quantity at the lowest ATC: that gap is excess capacity, and the price is above MC as well. Choose Monopolistic competition and Long run, and a brace under the quantity axis marks the excess capacity, from qₑ to the quantity at the lowest ATC.
How do I make a worksheet where students label the graph?
Under Labels, set Every label to Blank lines, and every curve, point, price, quantity and shaded region gets a line for students to write on; or start from the Students label a firm (blank labels) setup. Set single labels to Blank line or None one at a time, and the axis titles to blank lines under Titles.
Econ Figures Cost and Revenue Curves