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 P₃ the firm

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 P₃ the firm

Quizplus · Accepted Answer

At the given market price of P₃, the firm is earning a higher revenue than both its variable and fixed costs. The profit maximization point is at Q₂, where the firm's marginal cost curve intersects with the market price. At this quantity, the firm is able to produce and sell output at a cost lower than the market price, resulting in a profit. Therefore, the firm will make a profit at the given market price.

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