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Use a Graph to Demonstrate Why a Firm Might Remain

question 28

Essay

Use a graph to demonstrate why a firm might remain in business if it had negative economic profits. Be sure to explain the graph carefully and completely.


Definitions:

Demand Curve

illustrates the relationship between the price of a good and the quantity of that good consumers are willing and able to purchase at various prices.

Marginal Cost

The expense incurred in creating an extra single unit of a product or service.

Price Elasticity

A metric that determines how the demand for a certain good fluctuates with its price adjustments.

Marginal Revenue

The additional income that an organization receives from selling one more unit of a good or service.

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