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5. Since, at an output of 15 ATC = 27 and P = 20 this firm must
be incurring losses, even though it is maximizing profits (which
in this case means its losses are as small as possible). In the
graph to the right we show the amount of the loss as the yellow shaded rectangle.
The amount of profit (a negative number since it is a loss) is
easily computed. This rectangle has a height of 7 (27-20 or ATC
- P) and a width of 15 (amount of output) so loss is - 7x15 =
105.
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