Refer to the accompanying graph. 
a. If the firm is currently producing 7 units, should the firm increase or decrease production?
b. Is this firm making positive economic profits or incurring an economic loss?
Definitions:
Oil Deposits
Natural accumulations of hydrocarbons, typically underground, that can be extracted for use as fuel and in various industrial applications.
Incentive Function
The way in which economic rewards or penalties influence the actions of individuals and firms.
Competitive Markets
Markets where multiple firms are in rivalry to attract consumers, characterized by free entry and exit, leading to efficient outcomes.
Price Increases
An upward adjustment in the cost of goods or services, typically reflecting higher production costs or increased demand.
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