In the provided graph, we have various economic curves plotted on a Price vs. Quantity chart. Here's a detailed explanation of the graph:### Graph Explanation:- **Curves:** - **Demand (D):** This is a downward-sloping curve from left to right. - **Marginal Cost (MC):** This curve is upward-sloping, intersecting at the point where profit maximization occurs. - **Average Total Cost (ATC):** U-shaped curve that intersects the MC at the lowest point. - **Marginal Revenue (MR):** Downward-sloping line which is typically below the Demand curve in a monopolistic market.- **Axes:** - **Vertical Axis (Price):** Ranges from $3 to $11 with labels at $3, $5, $8, and $11. - **Horizontal Axis (Quantity):** Ranges from 0 to beyond 300 with labels at 200 and 300 units.### Intersection Points:- The intersection of the MC and MR curves indicates the profit-maximizing quantity.- From this intersection, a vertical line down to the Quantity axis reflects the optimal quantity (200 units).- A horizontal line to the Price axis reflects the profit-maximizing price (approximately $5).### Questions:a. **What are the profit-maximizing price and quantity?** - Profit-maximizing price: $5 - Profit-maximizing quantity: 200 unitsb. **At the profit-maximizing price and quantity, what are the total profits or losses made by this firm?** - To find total profits or losses, calculate the area between the price and ATC at the profit-maximizing quantity, multiplied by the quantity produced. At $200, the ATC is slightly above the price line, suggesting the firm is at a break-even point or incurs a small loss.

The profit maximizing output occurs at level where MR = MC. In this case MR = MC at 200 units. So,…

Answered: a. What are the profit-maximizing price…

a. What are the profit-maximizing price and quantity? b. At the profit-maximizing price and quantity, what are the total profits or losses made by this firm?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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