Note: This is post #43 in a weekly video series on basic microeconomics.
For companies, being able to predict expected profits—or expected losses—is a very useful tool. In this video by Marginal Revolution University, Alex Tabarrok introduces the third concept you need to maximize profit — average cost. When looked at in conjunction with the marginal revenue and marginal cost, the average cost curve will show you how to accurately predict how much profit you can make!
(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)
Previous in series: Maximizing profit under competition