Figure 14-2 -Refer to Figure 14-2.Which Statement Best Reflects the Situation Faced

Multiple Choice

Figure 14-2

-Refer to Figure 14-2.Which statement best reflects the situation faced by the firm when price falls from P4 to P₂

A) The firm will suffer a loss equal to (P4 - P₂) × Q₂.
B) The firm will earn profit equal to (P4 - P₂) × Q₂.
C) Marginal revenue is now lower than marginal cost at the previous level of output (Q₄) , so it decreases production.
D) Marginal revenue is now higher than marginal cost at the previous level of output (Q₄) , so it increases production.