Figure 12-7

Figure 12-7 illustrates the cost curves of a perfectly competitive firm.
-Refer to Figure 12-7.If the market price is P₂, the firm
A)will break even and produce a quantity of Q₂.
B)will make a profit and produce a quantity of Q₂.
C)will make a profit and produce a quantity of Q₁.
D)will make a profit and produce a quantity of Q₃.

Question

Figure 12-7
  
Figure 12-7 illustrates the cost curves of a perfectly competitive firm.
-Refer to Figure 12-7.If the market price is P₂, the firm
A)will break even and produce a quantity of Q₂. 
B)will make a profit and produce a quantity of Q₂. 
C)will make a profit and produce a quantity of Q₁. 
D)will make a profit and produce a quantity of Q₃.

Quizplus · Accepted Answer

At price P₂, the firm covers its average total costs, resulting in zero economic profit, which is breaking even, and produces quantity Q₂.

Figure 12-7 Figure 12-7 Illustrates the Cost Curves of a Perfectly Competitive