The following figure shows a firm's marginal and average costs of production.

a. The equilibrium price in this market is $5. At this price, does the firm earn profits or is it making losses?
b. From the given information, can you conclude whether the firm is operating in a competitive market? Explain your answer.
c. The price of the good increases to $8. How does this change your answer to parts a and b?

Transcribed Image Text:

Price $12 11 F 10 F 9 Marginal cost 7 6 5 4 3 2 Average cost 10 20 30 40 50 60 70 80 90 100 Quantity (in thousands)