4. In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curves would be:
A. a point of maximum economic profit.
B. a point of minimum economic loss.
C. a point where MR = MC.
D. a break-even point.

Question

4.    In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curves would be:
A.    a point of maximum economic profit.
B.    a point of minimum economic loss.
C.    a point where MR = MC.
D.    a break-even point.

BlackTom AI · Accepted Answer

The question asks about where the intersection of the total cost (TC) and total revenue (TR) curves occurs for a purely competitive firm.
Option A: 'a point of maximum economic profit.' In perfect competition, profit is TR minus TC, and the level of profit is maximized where marginal revenue equals marginal cost (MR = MC), not simply at the TC–TR intersection. Therefore this option misidentifies the condition for peak profit.
Option B: 'a point of minimum economic loss.' Economic loss occurs when TR < TC, and the location where TC and TR intersect corresponds to zero profit, not necessarily the minimum possible loss. Depending on prices and costs, the firm could incur losses or earn profits at other outputs, so this label is inaccurate.
Option C: 'a point where MR = MC.' While MR = MC indeed determines the profit-maximizing output for a competitive firm, that condition does not involve the crosspoint of TC and TR curves. The intersection TC = TR is a different concept from the MR = MC rule.
Option D: 'a break-even point.' When TR equals TC, profit is zero, which is the definition of a break-even point. This is exactly the outcome represented by the intersection of the TC and TR curves in this framework.

In summary, the TC–TR intersection identifies zero economic profit, distinguishing it from profit-maximizing output (MR = MC) or other loss considerations. The only choice that correctly matches this interpretation is the break-even point.

ECNM1116.32925.202530 Practice Quiz: Pure Competition in the Short Run

4. In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curves would be: A. a point of maximum economic profit. B. a point of minimum economic loss. C. a point where MR = MC. D. a break-even point.

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