Question
In a perfectly competitive industry, the market price is $25. A firm is currently producing 10,000 units of output, its average total cost is $28,
In a perfectly competitive industry, the market price is $25. A firm is currently producing 10,000 units of output, its average total cost is $28, its marginal cost is $20, and its average variable cost is $20.
Q1.Is the firm currently producing at its minimum average variable cost ?
A.No. The firm's average variable cost is at a minimum at an output level that is greater than the current level of output.
B.No. The firm's average variable cost is at a minimum at an output level that is less than the current level of output.
C.Yes. The firm's average variable cost is at a minimum at the current output level.
Q2. Is the firm maximizing its profit at the current level of output?
A.No. The firm should decrease its output so as to maximize its profit.
B.No. The firm should increase its output so as to maximize its profit.
C.Yes. the firm is maximizing its profit at the current level of output
Q3.What can be said about the firm's average total cost and its marginal cost at the level of output that maximizes its profit?
A. At the profit maximizing level of output, the firm's average total cost will be less than its marginal cost.
B. At the profit maximizing level of output, the firm's average total cost will be equal to its marginal cost.
C. At the profit maximizing level of output, the firm's average total cost will be greater than its marginal cost.
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