Final answer:
The business question involves understanding the concepts of average revenue and marginal revenue and their relationship to total revenue, total cost, and profit. By calculating these amounts for different quantities and prices, a firm can determine the optimal output level for profit maximization or assess conditions leading to a loss.
Step-by-step explanation:
The question relates to the economic concepts of average revenue (AR) and marginal revenue (MR) in the context of a firm's pricing and production decisions. While the student has asked to find the difference between MR and AR, which is typically MR - AR, the rest of the given information suggests a focus on understanding total revenue, total cost, and profit in different market conditions. For a firm, calculating these variables at various output levels can help determine the most profitable production quantity or the conditions under which they may be incurring losses.To illustrate, consider a scenario where a firm produces 40 units and sells them at $16 each, generating a total revenue of $640. If the total cost at this quantity is $580, the firm's profit is the difference, which is $60. However, at a quantity of 65 units with each unit selling at $2, resulting in a total revenue of $130, and an average cost of $2.73 per unit, the total cost is higher at $177.45, leading to a loss. The firm's profit or loss can be visualized using shaded rectangles on a graph representing revenue and cost at the given quantities and prices.