Suppose there is a single Mexican restaurant in a small town. Assume that it cannot price discriminate but maximizes its profit by following the optimal output rule. It serves only burritos.
The graph below shows the marginal cost (labeled MC), average cost (labeled AC), marginal revenue (labeled MR), and market demand (labeled Demand) curves for the restaurant.
Use the red rectangle (cross symbols) to shade the restaurant's total profit, and use the tan rectangle (dash symbols) to shade the restaurant's total cost.
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