At higher levels of output, such as q2, where MC> MR, so decrease the output will increase profits, as part of the cost savings that exceeded the increase in total revenue. Size S between q * and q2 was lost profits due to production in q2.
Figure H1 also shows the short-term profitability of the enterprise CTHH. The distance AB is the difference between price and average cost in total output level q *, which is the average profit. Section BC's total production volume. So the area ABCD is the gross margin of the business.
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