Principles of Microeconomics / Unit 6 MIC 0527 short lesson, about 20 seconds
Profit Margin: Price Against Average Cost
Captions available
The idea
Profit per unit is price minus average total cost, the profit margin. Price above average total cost means profit; price below means a loss on every unit.
In practice
A loaf sold at five dollars against an average cost of four earns a dollar.
Where people slip
The margin says whether there is profit, not how much to produce; that needs marginal cost, next unit.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Something wrong in this lesson? Flag it