Final answer:
The π or π(Q) represents profits as a function of quantity produced. Profits are calculated by subtracting total costs from total revenue and are influenced by the quantity a firm chooses to produce in a perfectly competitive market. option a.
Step-by-step explanation:
When the symbol π or π(Q) is used in the context of economics, it represents profits as a function of quantity produced. Profits are calculated as the difference between total revenue and total costs. Since in a perfectly competitive market, firms are price takers and must accept the market price, they cannot control the price but can decide on the quantity to produce. Thereby, the function π(Q) helps determine how changes in the quantity (Q) affect a firm's profits.
In the example given, with the firm selling at a price of $16 and an average cost of $14.50 for a quantity of 40, the total revenue is $640 and total cost is $580, resulting in a profit (π) of $60. The area representing profits on the graph is the shaded region above the average cost curve at the chosen quantity.
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