Refer to Figure 23.6 for a perfectly competitive firm. Assuming that points A, B, C and D are all above AVC, this firm will maximize profits by producing the level of output that corresponds to point
A. C.
B. D.
C. A.
D. B.
Answer: A
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Another term for "economic models" is
A) economic systems. B) economic theories. C) economic science. D) economic institutions.
When actual output exceeds potential output there is ________ output gap and the rate of inflation will tend to ________.
A. no; remain the same B. an expansionary; decrease C. an expansionary; increase D. a recessionary; increase
An "omitted variable" is
A) a variable which is purposely omitted from an economic analysis. B) a variable which is inadvertently omitted from an economic analysis. C) a variable that has no impact on other variables in an economic analysis. D) a variable that affects other variables and its omission from economic analysis can lead to false conclusions about cause and effect.
If in the short run total product is decreasing as more workers are hired, then the marginal physical product is
A) increasing. B) zero. C) negative. D) positive.