Figure 12-3

-Refer to Figure 12-3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.Identify the area that represents the loss.

Question

Figure 12-3
 
-Refer to Figure 12-3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.Identify the area that represents the loss.

Quizplus · Accepted Answer

The area representing the loss is the difference between total cost and total revenue at the loss-minimizing quantity. At price P₁, the firm covers its variable costs but not its total costs, resulting in a loss represented by the area P₃cbP₁.

Figure 12-3 -Refer to Figure 12-3.Suppose the Prevailing Price Is P₁ and Price