Graph 14-5 the Graph Depicts the Cost Structure of a Firm

question 13

Multiple Choice

Graph 14-5 The graph depicts the cost structure of a firm in a competitive market.Use the graph to answer the following question(s) .
-Refer to Graph 14-5.When market price is P₂, a profit-maximising firm's losses can be represented by the area:

• A)(P₃ - P₂) * Q₂
• B)(P₂ - P₁) * Q₂
• C)at a market price of P₂, the firm does not have losses
• D)at a market price of P₂, the firm has losses, but the reference points in the graph don't identify the losses

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Definitions:

Average Variable Cost

Average variable cost is the total variable costs of production divided by the number of units produced, indicating the average cost of producing each unit excluding fixed costs.

Average Total Cost

The total cost of production divided by the total quantity produced, indicating the cost per unit of output.

Marginal Cost

A measure of the expense associated with manufacturing an additional item of a particular good.

Total Variable Cost

The sum of all variable costs (costs that change with the level of output) associated with producing a specific amount of a good or service.