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The marginal costs ( MC ) , average variable costs ( AVC ) , and average total costs ( ATC ) for a firm are
The marginal costs MC average variable costs AVC and average total costs ATC for a firm are shown in the figure below.
Suppose the market is initially in a longrun equilibrium. Then, consumers find out that the product is harmful to one's health. This will cause the
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to
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and will cause the market price to
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Profit for this firm will
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As a result, firms will
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the market, which will cause the
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to
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and will cause the market price to
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until the profit for the marginal firm entering or exiting the market is
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