Figure 11-4
Figure 11-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 11-4.What is the area that represents the total variable cost of production?

Question

Figure 11-4
  Figure 11-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 11-4.What is the area that represents the total variable cost of production?

Quizplus · Accepted Answer

The total variable cost of production is represented by the area 0P₁bQₐ, which is the cost curve (VC) multiplied by the quantity produced (Qₐ) up to the point where MC (marginal cost) intersects it. This is because variable costs are those that vary with the level of output and increase as output increases. The area of 0P₁bQₐ represents the total variable cost incurred to produce Qₐ units of output.

Figure 11-4 Figure 11-4 Shows Short-Run Cost and Demand Curves