Table of contents

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0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

11. Perfect Competition

Perfect Competition Profit on the Graph

Microeconomics

11. Perfect Competition

Perfect Competition Profit on the Graph

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Multiple Choice

If the price is P1, the firm is

Suffering an economic loss

Earning an economic profit

Breaking even

None of the above

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Verified step by step guidance

Identify the key curves on the graph: the Marginal Cost (MC) curve and the Average Total Cost (ATC) curve.

Locate the price level P1 on the vertical axis and draw a horizontal line across the graph at this price level.

Determine the quantity where the price P1 intersects the MC curve. This is the profit-maximizing quantity, as firms maximize profit where price equals marginal cost (P = MC).

Check the position of the ATC curve at this quantity. If the price P1 is above the ATC curve at this quantity, the firm is earning an economic profit.

If the price P1 is equal to the ATC curve at this quantity, the firm is breaking even. If the price P1 is below the ATC curve, the firm is suffering an economic loss.