Figure 10-2

Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm. In the short run, this firm would

Question

Figure 10-2 ​

Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm. In the short run, this firm would

Quizplus · Accepted Answer

In the short run, the perfectly competitive firm will produce where the marginal cost curve intersects with the market price (demand) curve, which is at point E in the diagram. At this point, the firm is earning total revenue (TR) equal to PQ and the total cost (TC) is equal to the area under the marginal cost curve up to the level of output Q. Since TR is less than TC, the firm is earning economic losses in the short run. Therefore, the best choice is B, which indicates that the firm will earn economic losses.

Figure 10-2 ​ Figure 10-2 Shows Demand and Short-Run Cost Curves for a Cost

Figure 10-2 Figure 10-2 Shows Demand and Short-Run Cost Curves for a Cost