These are the cost and revenue curves associated with a firm. If the firm in the given graph were to produce Q2 and charge P2,then:

Question

These are the cost and revenue curves associated with a firm.  If the firm in the given graph were to produce Q2 and charge P2,then:

Quizplus · Accepted Answer

If the firm were to produce Q2 and charge P2, it would be producing where MR=MC. However, at this level of output and price, the total cost is greater than the total revenue, resulting in a negative economic profit. Therefore, option A is the correct choice. Option B is incorrect because deadweight loss occurs when output is less than the socially optimal level, which is not indicated in the graph. Option C is also incorrect as producer surplus will be positive at any price and output combination where price is above the average variable cost. Option D is incorrect because profits would only be maximized where MR=MC at the level of output where marginal cost intersects marginal revenue.

These Are the Cost and Revenue Curves Associated with a Firm