Economics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 3

The marginal costs, average variable costs (AVC), and average total costs (ATC) for a firm are shown in Figure 13P-2. In the figure, mark the quantity the firm will choose to produce in the short run given this cost structure and the market price. Does the firm earn positive or negative profits? Graph the area that defines the firm's profit (or loss).