![What is dredging a lake](https://cdn2.cdnme.se/5447227/9-3/16_64e61dfc9606ee7f98e9879e.png)
![supply demand curves of short term market shifts for perfect competition supply demand curves of short term market shifts for perfect competition](https://study.com/cimages/multimages/16/untitled-12847571171748599566.jpg)
The marginal cost cuts the SATC at its minimum point. We said that the demand curve is also the average revenue curve and the marginal revenue curve of the firm in a perfectly competitive market.
![supply demand curves of short term market shifts for perfect competition supply demand curves of short term market shifts for perfect competition](https://pressbooks.lib.vt.edu/app/uploads/sites/10/2020/06/3.3-new.png)
In figure 5.3 we show the average- and marginal-cost curves of the firm together with its demand curve. The alternative approach, which is based on marginal cost and marginal revenue, uses price as an explicit variable, and shows clearly the behavioural rule that leads to profit maximization.
![supply demand curves of short term market shifts for perfect competition supply demand curves of short term market shifts for perfect competition](https://saylordotorg.github.io/text_microeconomics-theory-through-applications/section_11/2f7b6b598b67aa2bd84e3201f1263dbf.jpg)
The total-revenue-total-cost approach is awkward to use when firms are combined together in the study of the industry.
![supply demand curves of short term market shifts for perfect competition supply demand curves of short term market shifts for perfect competition](https://s3.amazonaws.com/user-content.enotes.com/adc6bfef7a4c322c85af92531eb64b3a30384069.png)
At lower and higher levels of output total profit is not maximized at levels smaller than X A and larger than X B the firm has losses. The firm maximizes its profit at the output X e, where the distance between the TR and TC curves is the greatest. The shape of the total-cost curve reflects the U shape of the average-cost curve, that is, the law of variable proportions. It is constant and equal to the prevailing market price, since all units are sold at the same price. The slope of the TR curve is the marginal revenue. The firm is a price-taker and can sell any amount of output at the going market price, with its TR increasing proportionately with its sales. The total-revenue curve is a straight line through the origin, showing that the price is constant at all levels of output. In figure 5.2 we show the total revenue and total cost curves of a firm in a perfectly competitive market. Either by using the TR and TC curves, or the MR and MC curves. The equilibrium of the firm may be shown graphically in two ways.
![What is dredging a lake](https://cdn2.cdnme.se/5447227/9-3/16_64e61dfc9606ee7f98e9879e.png)