Exhibit 7-13 Price and cost per unit curves

-In Exhibit 7-13,if the price is P₃,total economic profit is maximized or economic loss minimized at the output:

Question

Exhibit 7-13 Price and cost per unit curves
 
-In Exhibit 7-13,if the price is P₃,total economic profit is maximized or economic loss minimized at the output:

Quizplus · Accepted Answer

At Q₃, the price (P₃) intersects with the minimum point of the Average Total Cost (ATC) curve, which means that the total economic profit is maximized or the economic loss is minimized. It is because at this output level, the price is high enough to cover all the variable costs and some of the fixed costs, resulting in a positive economic profit. At any other output level, either the price is lower than the minimum point of the ATC curve, leading to economic loss, or the price is higher than the minimum point of the ATC curve but the output level itself incurs higher total costs, reducing the economic profit. Therefore, the best choice is Q₃.

Exhibit 7-13 Price and Cost Per Unit Curves