Use the figure below to answer the following questions.

Figure 12.3.1
-Refer to Figure 12.3.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry. In the short run, the firm will

Question

Use the figure below to answer the following questions.
  
Figure 12.3.1
-Refer to Figure 12.3.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry. In the short run, the firm will

Quizplus · Accepted Answer

The firm will produce where marginal cost (MC) equals marginal revenue (MR), which in this case is at output level Q2. At this output level, the price is only equal to the average variable cost (AVC) and is below the average total cost (ATC), indicating that the firm is incurring an economic loss. Therefore, the best choice is D, incurring an economic loss.

Use the Figure Below to Answer the Following Questions