Figure 12-7 illustrates the cost curves of a perfectly competitive firm.
-Refer to Figure 12-7.If the market price is P3 the firm

Question

Quizplus · Accepted Answer

At P3, the market price is above the minimum of the average variable cost curve (AVC) and therefore the firm will produce at the output level where marginal cost (MC) equals the market price, which is at output level Q2. At this output level, the firm's average total cost (ATC) is below the market price, meaning that the firm will make a profit.

Figure 12-7 Illustrates the Cost Curves of a Perfectly Competitive