Figure 13-4

Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-4.What is the area that represents the total variable cost of production?
A)0P₀aQₐ
B)0P₁bQₐ
C)P₀abP₁
D)P₁bdP₃

Question

Figure 13-4
  
Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 13-4.What is the area that represents the total variable cost of production?
A)0P₀aQₐ 
B)0P₁bQₐ 
C)P₀abP₁ 
D)P₁bdP₃

Quizplus · Accepted Answer

The area that represents the total variable cost of production is 0P₁bQₐ, which is the area enclosed by the portion of the marginal cost curve above the average variable cost curve and the vertical line at Qₐ. This corresponds to the variable cost that varies with the level of output. Option A includes fixed costs, option C is incorrect as it is the area of consumer surplus, and option D is the area of deadweight loss.

Figure 13-4 Figure 13-4 Shows Short-Run Cost and Demand Curves for a and Demand