Use the figure below to answer the following question. Figure 11.3.3
-Refer to Figure 11.3.3,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry.The firm is

Question

Use the figure below to answer the following question.  Figure 11.3.3
-Refer to Figure 11.3.3,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry.The firm is

Quizplus · Accepted Answer

The firm is incurring an economic loss because its average total cost (ATC) is greater than the price (P) it receives for its output. In this case, the ATC curve intersects the marginal revenue (MR) curve at a quantity (Q) of output where P is below the ATC curve. Therefore, the firm is producing where its marginal cost (MC) intersects the MR curve, at a quantity (Q1) that is less than the break-even output (Q2) where P equals ATC. As a result, the firm is not covering all of its costs and is incurring losses represented by the shaded rectangle between the ATC curve and the price line at Q1.

Use the Figure Below to Answer the Following Question