The graph shown displays the cost curves for a firm in a perfectly competitive market. If themarket price is $12, which of the following statements is true?S1716151413121110098765432.1るる70 70 80 8040120130MC140150160170AVC1. The firm will earn negative profits if it produces 140 units.2. The profit-maximizing quantity is 120.3. The firm should consider how to minimize its losses.180190ATC200:...Quantity

The perfectly competitive market refers to a market where many buyers and sellers exist. A single seller cannot affect the market price. All sellers are price-takers in the market.(1)Answer: False statement.The market price is $12. The quantity of 140 also produces a positive profit. P=MC is a condition for output. Thus, when a firm produces 140 units of output, the ATC is less than P. Thus, the firm continues to make a positive profit.(2)Answer: True statement.P = MC is condition for profit maximization in a perfectly competitive market. Thus, output 120 corresponds to P =MC condition. Therefore, this is right statement.(3)Answer: False statementThe firm is making a positive profit, or its price is greater than its average total cost. Thus, a firm does not need to minimize its losses. The firm is making super normal profit at price $ 12(1)Answer: False statement.(2)Answer: True statement.(3)Answer: False statement

Answered: 1. The firm will earn negative profits…

Business

Economics

1. The firm will earn negative profits if it produces 140 units. 2. The profit-maximizing quantity is 120. 3. The firm should consider how to minimize its losses.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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