Figure 12-9

Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.At price P₂, the firm would

Question

Figure 12-9
  
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.At price P₂, the firm would

Quizplus · Accepted Answer

At price P₂, the firm would produce the quantity where the marginal cost curve intersects with the demand curve. This quantity is above the minimum of the average variable cost curve but below the minimum of the average total cost curve. Therefore, the firm would be able to cover its variable costs but not its fixed costs, leading to a loss that is less than its fixed cost.

Figure 12-9 Figure 12-9 Shows Cost and Demand Curves Facing a Profit-Maximizing