The Figure Given Below Represents a Firm in a Market

Multiple Choice

The figure given below represents a firm in a market characterized by many buyers and one seller.MC is the initial marginal cost of the seller.MC' denotes the marginal cost inclusive of the $1 transaction cost.On the other hand, buyers incur a transaction cost worth $2 represented by the vertical distance between D and D'.MR and MR' represent the marginal revenue curve corresponding to the demand curves D and D' respectively.


-Refer to Figure .Suppose the seller incurs an additional cost of $1 per unit of output to reduce the transaction costs of the buyers to zero.How will the profit earned by the seller change?

A) The firm's profit will increase by $0.62.
B) The firm's profit will increase by $2.6.
C) The firm's profit will remain unchanged.
D) The firm's profit will decrease by $6.2.