Figure 9-7
Figure 9-7 illustrates the cost curves of a perfectly competitive firm.
-Refer to Figure 9-7.If the market price is P₁

Question

Figure 9-7
  Figure 9-7 illustrates the cost curves of a perfectly competitive firm.
-Refer to Figure 9-7.If the market price is P₁

Quizplus · Accepted Answer

If the market price is P₁, the firm's average total cost (ATC) is higher than the market price, resulting in a loss. The firm produces at the quantity where the marginal cost equals the market price, which is Q₁. This quantity, however, is not enough to cover the total cost of production. Therefore, the firm experiences a loss. The best choice is option C, which states that the firm will experience a loss since the market price (P₁) is less than ATC.

Figure 9-7 Figure 9-7 Illustrates the Cost Curves of a of a Perfectly