A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 800 units is $3.50. The minimum possible average variable cost is $3.00. The market price of the product is $4.00. To maximize profit or minimize losses, the firm should:
A. produce less than 800 units.
B. shut down.
C. produce more than 800 units.
D. continue producing 800 units.
Answer: C
You might also like to view...
Consider the utility function 
. (Explain all your answers.)
a. Derive the function for the marginal rate of substitution.
b. Do the tastes represented by this utility function satisfy diminishing MRS?
c. The marginal utility of a good is defined as the change in utility from additional consumption of that good (holding all else constant). Derive the marginal utility of 
and 
.
d. Why does an ordinal approach to utility theory not any attention to what you derived in (c)?
e. Why does an ordinal approach to utility not treat the marginal rate of substitution the way it treats the marginal utility concept?
What will be an ideal response?
Development economics is the study of the
a. alleviation of absolute poverty. b. transformation of institutions. c. allocation of resources in developing countries. d. all of the above.
Which of the following is not a component of investment spending?
A) spending by firms on equipment B) the purchase of 1000 shares of corporate stock C) residential construction D) changes in inventories
When the average total cost is at its minimum, it is:
a. equal to average variable cost. b. greater than marginal cost. c. equal to average fixed cost. d. equal to marginal cost. e. less than marginal cost.