Figure 9-2
Figure 9-2 illustrates a firm

Question

Figure 9-2 
Figure 9-2 illustrates a firm

Quizplus · Accepted Answer

The firm in Figure 9-2 is facing a situation where its average total cost is higher than the price it receives for its output, resulting in economic losses. Therefore, it is not capable of earning economic profit or even breaking even at the profit-maximizing output level. Shutting down immediately may not be the best choice either, as the firm can minimize its losses by continuing to produce at the point where marginal revenue intersects with marginal cost, as long as it is able to cover its variable costs.

Figure 9-2 Figure 9-2 Illustrates a Firm