Final answer:
To interpret a business graph correctly, one must compare total revenue with total cost, identify profits or losses, and understand the shutdown point to make informed decisions about pricing and supply. Without the graph, precise statements can't be chosen, but general concepts about costs, pricing, and supply can be considered for the interpretations.
Step-by-step explanation:
Interpreting business graphs is essential for making informed decisions. In this scenario, the student is tasked with determining which statements correctly interpret a given graph about a business. To correctly assess the profitability and strategic moves a business should make, one must calculate profits by comparing total revenue and total cost, identify profits and losses with the average cost curve, understand the shutdown point, and determine the price at which a firm should continue producing in the short run.
An increase in supply, indicated by a rightward shift, generally means that prices will decrease and the quantity supplied will increase. If a business experiences lower costs, such as a messenger company with reduced gasoline prices, it can increase supply and potentially expand its market reach. However, if the firm is operating below the break-even point, it needs to decide whether continuing production and incurring losses is preferable to shutting down.
Based on the reference material, the correct interpretations of the graph, without actually viewing the graph, would likely focus on the relationship between costs, supply, and pricing strategies. If the business is earning enough revenue to cover its costs, it may not need to lower its prices or substantially lower its costs. However, if costs are high and not covered by revenue, strategies to reduce costs or adjust pricing would be necessary. The question regarding increasing supply should be determined by the demand; increasing supply when there is no demand could lead to excess inventory and additional costs.