**Graph Explanation:**The graph shows various curves relevant to profit maximization in economics. The vertical axis represents "Price and Cost," while the horizontal axis represents "Quantity."- **MC (Marginal Cost):** This curve is upward sloping and intersects both the AC and MR curves.- **AC (Average Cost):** This curve is upward sloping, located above the MR curve, and intersects it.- **MR (Marginal Revenue):** This is a straight horizontal line, which may represent constant revenue per additional unit sold.- **Points of Intersection:** - At a quantity of "C," the MR curve intersects with both the MC and AC curves. - The distance from the price level at "A" to "B" is marked on the price axis.**Question and Options:** Refer to the accompanying graph to answer the three questions that follow.If the firm is maximizing profits, profit is represented by the area:1. AxC2. (A+B)xC3. AxB4. BxC5. (A-B)xC

The correct option is E i.e. (A-B)xC.

Answered: If the firm is maximizing profits,…

Business

Economics

If the firm is maximizing profits, profit is represented by the area:

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

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**Graph Explanation:**

The graph shows various curves relevant to profit maximization in economics. The vertical axis represents "Price and Cost," while the horizontal axis represents "Quantity."

- **MC (Marginal Cost):** This curve is upward sloping and intersects both the AC and MR curves.
- **AC (Average Cost):** This curve is upward sloping, located above the MR curve, and intersects it.
- **MR (Marginal Revenue):** This is a straight horizontal line, which may represent constant revenue per additional unit sold.
- **Points of Intersection:**
- At a quantity of "C," the MR curve intersects with both the MC and AC curves.
- The distance from the price level at "A" to "B" is marked on the price axis.

**Question and Options:**

Refer to the accompanying graph to answer the three questions that follow.

If the firm is maximizing profits, profit is represented by the area:

1. AxC
2. (A+B)xC
3. AxB
4. BxC
5. (A-B)xC

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