Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves:
-Refer to Figure 14-3. When market price is P₇, a profit-maximizing firm's short-run profits can be represented by the area

Question

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves:

-Refer to Figure 14-3. When market price is P₇, a profit-maximizing firm's short-run profits can be represented by the area

Quizplus · Accepted Answer

In the short run, a profit-maximizing firm's profits are calculated by the difference between the market price and the average total cost (ATC) at the profit-maximizing output level, multiplied by the quantity produced. Choice C correctly represents this calculation as the area between the market price (P₇) and the ATC at the profit-maximizing output (P₅), across the quantity produced (Q₃).

Figure 14-3 Suppose a Firm Operating in a Competitive Market Has the Has