The Figure Given Below Shows the Revenue and Cost Curves

question 24

Multiple Choice

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 9.5
MC: Marginal cost curve
MR: Marginal revenue curve.
ATC: Average-total-cost curve
AVC: Average-variable-cost curve
-Assume the price facing the firm in Figure 9.5 is P_1.Which of the following statements is true?

• A)Total revenue for the firm is area 0BDQ₁.
• B)The firm should produce Q₂.
• C)Total cost for the firm is area 0P₁EQ₁.
• D)The firm's total revenue is more than sufficient to cover its variable costs,so it should remain in operation.
• E)The firm should shut down because price per unit received is less than average total cost.

---

Definitions:

Total Variable Costs

The sum of all costs that vary with the level of output, including materials and labor directly involved in the production process.

Output

The total amount of goods or services that are produced by a company or an economy.

Price Discounts

Reductions from the regular selling price of goods or services, often used as a strategy to increase demand or reward customers.

Competitive Market

A market structure characterized by a large number of buyers and sellers, free entry and exit, and a homogenous product, leading to price determination through supply and demand forces.