Asked by Caden DeValle on May 07, 2024
Verified
Refer to Figure 8.4.1 above. The shaded area in the graph shows:
A) the increase in profit when output is reduced from 8 to 7 units of output.
B) the profit that could be made if output increases from 7 to 8 units of output.
C) the deadweight loss associated with the power of the price taking firm.
D) the amount of profit when 8 units of output are produced.
Deadweight Loss
A reduction in economic productivity happens when a good or service fails to reach or cannot attain its equilibrium state.
Output
The total amount of goods or services produced by a person, machine, or industry during a given period.
Price Taking Firm
A company that must accept the market price for its product, as it has no power to influence the price due to intense competition or market conditions.
- Assess the relationship of total revenue, total cost, marginal revenue, and marginal cost in terms of their effects on maximizing earnings.
- Identify the demonstration of profit maximization through graphs and tables illustrating cost, revenue, and output levels interactions.
Verified Answer
LS
Lourds SandraMay 14, 2024
Final Answer :
B
Explanation :
The shaded area represents the additional profit that could be made if output is increased from 7 to 8 units. This is because the marginal cost of producing the 8th unit is lower than the market price, resulting in a higher profit.
Learning Objectives
- Assess the relationship of total revenue, total cost, marginal revenue, and marginal cost in terms of their effects on maximizing earnings.
- Identify the demonstration of profit maximization through graphs and tables illustrating cost, revenue, and output levels interactions.