between marginal revenue (MR) and average total cost (ATC) at an output of 6,700 pounds of radishes times the number of pounds of radishes produced, 6,700, in Figure 9.7 "Applying the Marginal Decision Rule" Heads Up! Look carefully at the rectangle that shows economic profit in Panel (b) of Figure 9.7 "Applying the Marginal Decision Rule" It is found by taking the profit-maximizing quantity, 6,700 pounds, then reading up to the ATC curve and the firm’s demand curve at the market price Economic profit per unit equals price minus average total cost (P − ATC) The firm’s economic profit equals economic profit per unit times the quantity produced It is found by extending horizontal lines from the ATC and MR curve to the vertical axis and taking the area of the rectangle formed There is no reason for the profit-maximizing quantity to correspond to the lowest point on theATC curve; it does not in this case Students sometimes make the mistake of calculating economic profit as the difference between the price and the lowest point on the ATC curve That gives us the maximum economic profit per unit, but we assume that firms maximize economic profit, not economic profit per unit The firm’s economic profit equals economic profit per unit times quantity The quantity that maximizes economic profit is determined by the intersection of ATC and MR Economic Losses in the Short Run Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 485