Question is based on the following graph, which shows a firm…
Questions
Questiоn is bаsed оn the fоllowing grаph, which shows а firm’s marginal cost (MC), average total cost (ATC), and average variable cost (AVC). The figure shows a graph with a horizontal axis labeled Quantity and a vertical axis labeled Price. Four quantities appear on the horizontal axis, starting in the middle of the horizontal axis, from left to right, and are labeled Q 1, Q 2, Q 3, Q 4. Five prices appear on the vertical axis and are labeled, from bottom to top and starting slightly up the vertical axis, P 0, P 1, P 2, P 3, and P 4. Three curved lines appear on the graph. A curved line labeled M C begins slightly above P 1 and to the left of Q 1. The curve moves slightly down and to the right before it reaches Q 1. Just before it reaches Q 1 it turns up and then begins to move steadily up and to the right crossing through the points Q 1 and P 1, Q 2 and P 2, Q 3 and P 3, and Q 4 and P 4. The curve ends slightly above P 4 and just to the right of Q 4. A curved line labeled A T C begins above P 4 and to the left of Q 1. The curve moves steadily down and to the right until it intersects the M C curve at the point Q 3 and P 3. It then turns up and continues to move up and to the right ending slightly above P 4 and to the right of Q 4. A curved line labeled A V C begins above P 2 and to the left of Q 1. The curve line moves downward and to the right until it intersects the M C curve at point Q 2 and P 2. The curve then turns up and continues to move up and to the right ending slightly above P 4 and to the right of Q 4. In the short run, the firm will