Drawing Market Structure Diagrams

Four easy steps to drawing market structure diagrams

Follow these easy steps and you will be able to draw any market structure diagram

Step 1

Draw a Revenue Curve i.e. MR & AR curves

Step 2

Now place revenue curves i.e. AC and MC curves.

 If there is abnormal profit the AC curve will be below the AR curve.

If there is loss then the AC curve will be above the AR curve.

 If the firm is having normal profit then the AC curve touches the AR curve.

Step 3

Now, identify the output level of the firm. It is always be the profit maximisation level, i.e. the point where the MC cuts the MR.

Step 4

At the profit maximisation level, identify the cost on AC curve and the revenue at AR curve. The difference will give to abnormal profit and loss accordingly.

Congratulations!! You have completed the diagram.

The presentation below illustrates these steps.