FIGURE 8-4

-Refer to Figure 8-4. What does Graph A illustrate?

Question

FIGURE 8-4
 
-Refer to Figure 8-4. What does Graph A illustrate?

Quizplus · Accepted Answer

Graph A shows a price-taking firm experiencing a loss of $80. This is because the average variable cost (AVC) curve intersects with the marginal revenue (MR) curve at a quantity of 5 units. At this point, total revenue (TR) is equal to total variable cost (TVC), and the firm is only covering its variable costs. However, it is not covering its fixed costs, which results in a loss.

FIGURE 8-4 -Refer to Figure 8-4. What Does Graph a Illustrate