Price MR MC ATC AVC MC ATC MR1 AVc MR2 Quantity 1 Figure 1 P

Price, MR MC, ATC, AVC MC ATC MR1 AVc MR2 Quantity 1. (Figure 1: Perfectly Competitive Firm) If this firm\'s MR curve is MRi, then this firm will profi maximize by producing a. Ql; positive b. Q2; negative . Q3; positive . Q4; negative . zero; negative units of output and its economic profit will be

Solution

Answer is Q3; Positive. Explanation: When MR1 is a marginal revenue it intersect MC curve at a point, where equilibrium Quantity is Q3. However, at this level of Quantity ATC is less than the MR (or Ar) curve, hence the firm is earning positive economic profits.