Figure 13-7

Figure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market.
-Refer to Figure 13-7.Which of the following is the area that represents the profit or loss experienced by the firm?
A)a loss represented by the rectangle P₂uvP₁
B)a loss represented by the rectangle P₂uwP₀
C)a loss represented by the rectangle P₁vwP₀
D)an accounting profit equal to P₁vwP₀

Question

Figure 13-7
  
Figure 13-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market.
-Refer to Figure 13-7.Which of the following is the area that represents the profit or loss experienced by the firm?
A)a loss represented by the rectangle P₂uvP₁ 
B)a loss represented by the rectangle P₂uwP₀ 
C)a loss represented by the rectangle P₁vwP₀ 
D)an accounting profit equal to P₁vwP₀

Quizplus · Accepted Answer

The area that represents the profit or loss experienced by the firm is a loss represented by the rectangle P₂uvP₁. This is because the area below the average variable cost curve and above the price line represents the loss incurred by the firm.

Figure 13-7 Figure 13-7 Shows Short-Run Cost and Demand Curves for a and Demand