The graph illustrates cost and revenue curves related to a firm's output. The vertical axis represents cost/revenue in dollars, ranging from $0 to $30. The horizontal axis represents the output (Q), ranging from 0 to 55 units.Three main curves are depicted:1. **MC (Marginal Cost)** - This red curve initially decreases, reaches a minimum point, and then increases sharply. 2. **ATC (Average Total Cost)** - This blue curve also decreases initially, reaching a minimum point before starting to increase, but at a slower rate than MC.3. **AVC (Average Variable Cost)** - Another blue curve below the ATC, it shows a similar pattern but at lower cost levels.The horizontal black line marks the MR = P (Marginal Revenue = Price) at $10.At the intersection of MR = P and MC, the firm determines its optimal output level where profit is maximized or loss is minimized.Below the graph, there's a multiple-choice question regarding the firm's short-run financial outcome:"The firm shown in the diagram above will be making a __________ of __________ in the short run."Choices:- Loss; $150- Profit; $100- Profit; $200- Loss; $140This question requires interpreting the graph to determine whether the firm is making a profit or a loss at the given price level.

A competitive firm produces where P=MC. At P= MC this firm produce Q=25 units.

$30 $28 $26 $24 $22 $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 MC АТС AVC MR = P 5 10 15 20 25 30 35 40 45 50 55 Output (Q) The firm shown in the diagram above will be making a of in the short run. loss; $150 profit; $100 O profit; $200 loss; $140

$30 $28 $26 $24 $22 $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 MC АТС AVC MR = P 5 10 15 20 25 30 35 40 45 50 55 Output (Q) The firm shown in the diagram above will be making a of in the short run. loss; $150 profit; $100 O profit; $200 loss; $140

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The graph illustrates cost and revenue curves related to a firm's output. The vertical axis represents cost/revenue in dollars, ranging from $0 to $30. The horizontal axis represents the output (Q), ranging from 0 to 55 units.

Three main curves are depicted:

1. **MC (Marginal Cost)** - This red curve initially decreases, reaches a minimum point, and then increases sharply.

2. **ATC (Average Total Cost)** - This blue curve also decreases initially, reaching a minimum point before starting to increase, but at a slower rate than MC.

3. **AVC (Average Variable Cost)** - Another blue curve below the ATC, it shows a similar pattern but at lower cost levels.

The horizontal black line marks the MR = P (Marginal Revenue = Price) at $10.

At the intersection of MR = P and MC, the firm determines its optimal output level where profit is maximized or loss is minimized.

Below the graph, there's a multiple-choice question regarding the firm's short-run financial outcome:

"The firm shown in the diagram above will be making a __________ of __________ in the short run."

Choices:
- Loss; $150
- Profit; $100
- Profit; $200
- Loss; $140

This question requires interpreting the graph to determine whether the firm is making a profit or a loss at the given price level.

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