The firm's equilibrium supply of 29 units of output is determined by the intersection of the marginal cost and marginal revenue curves (point d in Figure 1 ). When the firm produces 29 units of output, its average total cost is found to be $6.90 (point c on the average total cost curve in Figure 1 ). The firm's profits are therefore given by the area of the shaded rectangle labeled abed . The area of this rectangle is easily calculated. The length of the rectangle is 29. The width is the difference between the market price (the firm's marginal revenue), $10, and the firm's average cost of producing 29 units, $6.90. This difference is ($10 × $6.90) = $3.10. Hence, the area of rectangle abed is 29 × $3.1 = $90, the same amount reported in Table 1 . In general, the firm makes positive profits whenever its average total cost curve lies below its marginal revenue curve.
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