Figure 12-3 Figure 12-3 illustrates the cost curves of a perfectly competitive firm.
-Refer to Figure 12-3.If the market price is P₁

Question

Figure 12-3 Figure 12-3 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 12-3.If the market price is P₁

Quizplus · Accepted Answer

In a perfectly competitive market, the firm is a price taker and cannot influence the market price. Therefore, if the market price is below the average total cost (ATC) curve at the profit-maximizing output level, the firm will experience a loss. In this case, the market price (PS1) is below the minimum point of the ATC curve (ATC1) at the quantity produced (QS1). Thus, the firm will experience a loss.

Figure 12-3 Figure 12-3 Illustrates the Cost Curves of a Perfectly