The following figure shows equilibrium at the industry and firm level. Figure 10

ID: 1223105 • Letter: T

Question

The following figure shows equilibrium at the industry and firm level.

Figure 10.6

In the figure,

S1, S2, S3 are the market supply curves.

D1 and D2 are the market demand curves.

MC is the marginal cost curve of the firm.

MR1 and MR2 are the marginal revenue curves of the firm.

ATC is the average-total-cost curve of the firm.

According to Figure 10.6, if the market price was $1.50, the individual firm would:

be earning a negative economic profit of about $4.50.

be earning a positive economic profit of about $5.

be earning a positive economic profit of about $0.87.

be earning a positive economic profit of about $0.50.

be earning a negative economic profit of about $5.

The following figure shows equilibrium at the industry and firm level.

Figure 10.6

In the figure,

S1, S2, S3 are the market supply curves.

D1 and D2 are the market demand curves.

MC is the marginal cost curve of the firm.

MR1 and MR2 are the marginal revenue curves of the firm.

ATC is the average-total-cost curve of the firm.

Option (b).

When price = $1.5, quantity = 10 and ATC is close to $1.

Economic profit = Q x (P - ATC) = 10 x $(1.5 - 1) = 10 x $0.5 = $5

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.