Fixed costs for a perfectly competitive firm in the short run
Hi there, I have an assignment and one of the questions has me confused without even being that hard. It requires drawing a graph illustrating the ATC, AVC, MC & MR curves, and illustrating an economic profit of less than zero (all without specific numbers or anything). So far so good, but the confusing part for me is when it asks you to draw it as if the firm covered all the fixed costs. I know the AVC is below the price or MR level, and the ATC has to be above in order for them to have an economic profit less than 0, but where does the AFC curve go really? If they are fixed, in the short run at least, it should be a straight line, correct?
Please, if anyone can help me it would be very much appreciated! Thanks.
Please, if anyone can help me it would be very much appreciated! Thanks.
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