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Dollars PWY V 0 an economic profit of WPHG. an economic profit of VPHF an economic loss of VWGF H O an economic loss of WPHG. G X Y Z Quantity MC ATC From the graph above, at the profit-maximizing output, this firm will realize AVC MR

Dollars PWY V 0 an economic profit of WPHG. an economic profit of VPHF an economic loss of VWGF H O an economic loss of WPHG. G X Y Z Quantity MC ATC From the graph above, at the profit-maximizing output, this firm will realize AVC MR

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### Economic Profit and Loss: Understanding Graphs **Graph Description** The graph provided here illustrates several key economic concepts and includes the following curves and points: - **MC Curve (Marginal Cost):** This curve is typically U-shaped and shows the cost of producing one more unit of a good. - **ATC Curve (Average Total Cost):** This curve is also U-shaped and shows the total cost per unit of output. - **AVC Curve (Average Variable Cost):** This curve lies below the ATC and usually has a U-shape, representing variable costs per unit of output. - **MR Curve (Marginal Revenue):** This curve generally represents the additional revenue from selling one more unit of a good. **Key Points and Lines on the Graph** - **P, W, V (Price Levels in Dollars):** These horizontal lines represent different price levels on the y-axis. - **X, Y, Z (Quantities):** These vertical lines indicate quantities on the x-axis. - **H, J, G, F (Intersection Points):** These labeled points correspond to intersections of various curves at specific quantities. **Analysis Question** At the profit-maximizing output level, firms need to identify whether they are realizing an economic profit or loss. The given results are based on comparison between price levels and costs. **Question and Answer Options** "From the graph above, at the profit-maximizing output, this firm will realize": - O an economic profit of WPHG. - O an economic profit of WPHF. - O an economic loss of VWGF. - O an economic loss of WPHG. By analyzing the intersections and positions of MR, MC, ATC, and AVC at various quantities and price levels, one can determine the specific type of economic outcome rendered (profit or loss) for the firm. The correct choice will be determined by comparing these points on the graph at the profit-maximizing quantity. **How to Determine the Outcome?** 1. **Find the Profit-Maximizing Quantity:** - This quantity is where the marginal cost (MC) curve intersects the marginal revenue (MR) curve. 2. **Compare Price (P) and Average Total Cost (ATC):** - If the price (P) is greater than average total cost (ATC) at quantity Y, the firm makes an economic profit. - If the price (P) is less than average total cost
Transcribed Image Text:### Economic Profit and Loss: Understanding Graphs **Graph Description** The graph provided here illustrates several key economic concepts and includes the following curves and points: - **MC Curve (Marginal Cost):** This curve is typically U-shaped and shows the cost of producing one more unit of a good. - **ATC Curve (Average Total Cost):** This curve is also U-shaped and shows the total cost per unit of output. - **AVC Curve (Average Variable Cost):** This curve lies below the ATC and usually has a U-shape, representing variable costs per unit of output. - **MR Curve (Marginal Revenue):** This curve generally represents the additional revenue from selling one more unit of a good. **Key Points and Lines on the Graph** - **P, W, V (Price Levels in Dollars):** These horizontal lines represent different price levels on the y-axis. - **X, Y, Z (Quantities):** These vertical lines indicate quantities on the x-axis. - **H, J, G, F (Intersection Points):** These labeled points correspond to intersections of various curves at specific quantities. **Analysis Question** At the profit-maximizing output level, firms need to identify whether they are realizing an economic profit or loss. The given results are based on comparison between price levels and costs. **Question and Answer Options** "From the graph above, at the profit-maximizing output, this firm will realize": - O an economic profit of WPHG. - O an economic profit of WPHF. - O an economic loss of VWGF. - O an economic loss of WPHG. By analyzing the intersections and positions of MR, MC, ATC, and AVC at various quantities and price levels, one can determine the specific type of economic outcome rendered (profit or loss) for the firm. The correct choice will be determined by comparing these points on the graph at the profit-maximizing quantity. **How to Determine the Outcome?** 1. **Find the Profit-Maximizing Quantity:** - This quantity is where the marginal cost (MC) curve intersects the marginal revenue (MR) curve. 2. **Compare Price (P) and Average Total Cost (ATC):** - If the price (P) is greater than average total cost (ATC) at quantity Y, the firm makes an economic profit. - If the price (P) is less than average total cost
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