The figure given below shows the demand and cost curves of a perfectly competitive firm.Figure: 10.4
D: Demand curve
MC: Marginal cost curve
ATC: Average-total cost curve
AVC: Average-variable-cost curve
-Refer to Figure 10.4. At the profit-maximizing output level, which of the following is true?

Question

The figure given below shows the demand and cost curves of a perfectly competitive firm.Figure: 10.4
  D: Demand curve
MC: Marginal cost curve
ATC: Average-total cost curve
AVC: Average-variable-cost curve
-Refer to Figure 10.4. At the profit-maximizing output level, which of the following is true?

Quizplus · Accepted Answer

The profit-maximizing output level is where MC = MR, which is at the output level where the MC curve intersects the demand curve. In this case, that output level is Q* = 6. At Q* = 6, the price is P* = $35, which is also equal to the ATC at that output level. Therefore, the firm is breaking even, but not making a profit or incurring a loss. Thus, the firm is losing $10 per unit of output.

The Figure Given Below Shows the Demand and Cost Curves