To the right is the same graph we saw before but with numerical values replacing the letters to help illustrate a simple loss calculation.
We show the firm producing 20 units of output, the level of output where MR = MC. At that level of output the firm sells its product for 10 per unit. This means the firm's total revenue is 10 x 20 = 200. At 20 units of output ATC = 12
, so total cost is 20 x 12 = 240. So profit = TR - TC = 200 - 240 = -40, in other words, the firm is experiencing losses of 40. Or average loss is 12 - 10 = 2 per unit, so loss is 20 x 2 = 40.
