Figure 9-18

-Refer to Figure 9-18.At the profit-maximizing level of output,the firm will earn an economic (Hint: Areas in the exhibit are referenced by the four letters on the corners of the respective area. )
A)profit of AHEC.
B)profit of BIFC.
C)loss of AHEC.
D)loss of BIFC.

Question

Figure 9-18
 
-Refer to Figure 9-18.At the profit-maximizing level of output,the firm will earn an economic (Hint: Areas in the exhibit are referenced by the four letters on the corners of the respective area. )
A)profit of AHEC. 
B)profit of BIFC. 
C)loss of AHEC. 
D)loss of BIFC.

Quizplus · Accepted Answer

At the profit-maximizing level of output, the firm will choose to produce where marginal revenue (MR) equals marginal cost (MC), which is at point E in the graph. At this level of output, the firm's total revenue (TR) is given by the rectangle under the demand curve (DH) and above the output level (QE). The total cost (TC) is given by the rectangle under the MC curve (EF) and above the output level (QE). The shaded rectangle BIFC represents the firm's economic profit at this level of output, which is positive and maximum compared to other choices. Therefore, the best choice is B.

Figure 9-18 -Refer to Figure 9-18.At the Profit-Maximizing Level of Output,the Firm