Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?
A. No, average total costs have increased which means the company is not minimizing losses.
B. Yes, because average variable costs are always less than average total costs.
C. No, the previous level of output was the most efficient because it had the lowest average total cost.
D. Yes, even though the previous level of output had minimized the average total cost, there was still profit to be earned by producing additional units.
Answer: D
You might also like to view...
Which of the following is likely to have the narrowest bid-asked spread?
A) A Nasdaq stock B) A U.S. Treasury bill C) A corporate bond D) A Fannie Mae bond
What does the demand curve facing a monopoly look like? Why?
What will be an ideal response?
Mika's Manicures leases a space in the local mall for $4,500 a month. For this business, this expense would be considered an:
A. implicit cost of $4,500. B. explicit cost of $4,500. C. explicit cost of $0. D. This is neither an implicit or explicit cost; it is a fixed cost of $4,500.
Which of the following is (are) true of a monopoly? (i) A monopoly has the ability to set its price. (ii) A monopolists marginal revenue will always increase when it lowers the price of its product. (iii) A monopoly can never experience an economic loss
a. (i) only b. (ii) only c. (i) and (ii) only d. (ii) and (iii) only