The following figure shows the cost curves of a firm producing good X.

-Refer to Figure .What does the area ABCD signify?
A)The total revenue earned when the market price is $8 per unit of X.
B)The total profit earned when the market price is $8 per unit of X.
C)The total revenue earned when the market price is $5 per unit of X.
D)The total profit earned when the market price is $5 per unit of X.

Question

The following figure shows the cost curves of a firm producing good X.
 
-Refer to Figure .What does the area ABCD signify?
A)The total revenue earned when the market price is $8 per unit of X. 
B)The total profit earned when the market price is $8 per unit of X. 
C)The total revenue earned when the market price is $5 per unit of X. 
D)The total profit earned when the market price is $5 per unit of X.

Quizplus · Accepted Answer

The area ABCD signifies the total profit earned by the firm at a market price of $8 per unit of X. This is because the area represents the difference between total revenue (the area below the demand curve and above the price line) and total cost (the area below the marginal cost curve and above the quantity axis) at that price level. Therefore, the best choice is B.

The Following Figure Shows the Cost Curves of a Firm