Use Pic 1 for question 3 Pic 1 Price unit costs Market Deman

Use Pic. 1 for question 3. Pic. 1 Price, unit costs Market Demand AC Q1 Q2 Q 3. Pic. 1 depicts the average cost of producing some product. It also shows the market demand for this product. If a total quantity of Q2 is produced by 2 firms (for simplicity assume each produces Q2/2), then A. both firms will have positive profits. B. one of the firms will have positive profits, the other will have negative profits. C. both firms will have negative profits D. both firms will have zero profits

Solution

\"C\"

Both the firms will have a negative profit. Here, the firms will earn a profit only when they are selling a total quantity of Q2 and if the amount decreases the Total cost of producing the good will increase rapidly. At just half the quantity produced the cost will be very high and the firm will face loss.