The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 9.1 In Figure 9.1, average fixed cost at the profit-maximizing output is equal to ______.

Question

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 9.1  In Figure 9.1, average fixed cost at the profit-maximizing output is equal to ______.

Quizplus · Accepted Answer

At the profit-maximizing output, the firm will produce the quantity at which marginal cost (MC) equals marginal revenue (MR). This occurs at a quantity of Q1, where MC intersects with MR on the graph.

At Q1, we can see that the average fixed cost (AFC) is equal to GH. This is because AFC is the vertical distance between the total cost (TC) curve and the total variable cost (TVC) curve, divided by the quantity produced. At Q1, the TC curve intersects with the TVC curve at point G, and the quantity produced is Q1, so AFC is equal to GH.

The Figure Given Below Shows the Revenue and Cost Curves