A rare treat for an economics teacher. A chart that quantifies (not completely but enough) the difference between "Economic Costs" which include opportunity costs (implicit costs) as well as money costs (explicit costs), and "Accounting Costs" which include ONLY money costs.
|Source: USDA ERS|
This is a key concept in AP Microeconomics that is somewhat difficult to convey to high school aged students.
The vertical difference between the RED and BLUE lines represents the Opportunity Costs to the producer for staying in business.
The price or Marginal Revenue (MR) or Average Revenue (AR), a producer receives must at least equal the RED line for her to "Break Even".
However, she could still make an Accounting Profit at that price. Is she?
According to the USDA ERS (HERE) the average price for "all classes of milk" was $20.05 per CWT) in 2013. Now look back at the graph and draw a straight line across the $20.00 mark denoted on the vertical axis. Compare that to the RED and BLUE lines.
At that price ONLY the large producers (1000 or more milk cows) are Breaking Even in "Economic" terms BUT making profit in "Accounting" terms.
Notice at about 300 cows the average costs start to drop at a relatively steep rate and production increases quickly. I assume that is the inflection point where economies of scale really kick in.
Hope this helps with teaching and/or learning about this important concept when the topic of a firm that operates in a "Perfectly Competitive" market.