1st attempt Part 1 1 point See Hint The firm is making an ec

1st attempt

Part 1   (1 point)

See Hint

The firm is making an economic profit at

.

Part 2   (1 point)

See Hint

The firm is breaking even (making zero profit) at

.

Part 3   (1 point)

See Hint

The firm is experiencing an economic loss at

.

Price ATC MC AVC 6 4 3 2 Quantity

Solution

Part 1.

Given the above graph, the firm is making an economic profit at points P5 and P6. This is because economic profits occur at a point where MC is greater than ATC.

Part 2.

The firm is breaking even, making zero economic profits at point P4. Here, MC = ATC

Part 3.

The firm is experiencing an economic loss at all points below P4 ( because MC is less than ATC).