Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves:
-Refer to Figure 14-5.When market price is P7,a profit-maximizing firm's short-run profits can be represented by the area

Question

Figure 14-5
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-5.When market price is P7,a profit-maximizing firm's short-run profits can be represented by the area

Quizplus · Accepted Answer

When the market price is P7, the profit-maximizing output level for the firm is Q3. The total revenue earned by the firm is P7 multiplied by Q3. The total cost of producing Q3 units of output is given by the area P7 F1F1F1S1 multiplied by Q3. Therefore, the profit earned by the firm is the difference between total revenue and total cost, which is (P7 - P5)F1F1F1S1 multiplied by Q3, represented by the shaded area labeled "profit" on the graph.

Figure 14-5 Suppose a Firm Operating in a Competitive Market Has the Has