The diagram depicts a cost curve graph of a price-taking firm that is currently operatin and producing cherries. Identify each item in the graph of this cherry producer. There are more labels than boxes. The average total cost (ATC), marginal cost (MC), and marginal revenue (MR) curves are already labeled.

 

Diagram depicting a cost curve graph of a price-taking firm that is currently is currently operating and producing cherries

(Please see the diagram with items identified in the uploaded file)

A firm that is price-taking production, quantity of cherries is done at the point where MR = DD = AR, a point marked as Q in the diagram a point where profit is maximized

The firm fixes a price level that is already set in the market, whereby the marginal revenue shows the same price level for all other firms that are price takers and this point is labeled as market place in the diagram.

The point of intersection between curve that represent quantity that maximizes profit and the average total cost curve shows the average total cost at Q profit maximum.

Given that the average total cost at quantity where profit is maximized is higher than the market place, then the firm will be operating under a loss. The loss is represented by the part labelled as X in the diagram.

Please see the attached file for the complete solution