Examine the figure

Economics Dec 07, 2020

Examine the figure. The monopolistic competitor in the figure is producing at the output level that maximizes profits (minimizes losses). The shaded rectangle depicts the level of:

a) profit.

b) loss.

c) fixed cost.

d) variable cost.

Expert Solution

Option c) fixed cost is correct

This option is correct because the shaded area is the difference between average variable cost and average total cost. It is the difference of average fixed cost for produce Q unit. So, the shaded area is the total fixed cost for the monopolist.

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