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; because the marginal cost of producing the last unit is the same as the marginal revenue.
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.
e. No; the previous level of output was the most efficient because it had the lowest average total cost.
D
You might also like to view...
It is a mistake to calculate the cost per mile of owning a car because doing so implies
A) additional driving will lower the cost of owning a car. B) future fuel and maintenance costs cannot be predicted. C) marginal costs are the only relevant costs. D) opportunities will not arise to sell the car.
If a monopoly firm sells to competitive distributors and the distributors have a constant marginal cost of $2 and they are paying the profit-maximizing wholesale price of $8, what is the retail price of the product?
A) $6 B) $8 C) $2 D) $10
Wilbur's Bean Emporium serves barbeque sandwiches over the lunch hour. The marginal cost of t he 50th barbeque sandwich is $1.50. The average total cost of the 49th sandwich is $1.75. For Wilbur's Bean Emporium, __________ when output is 50 sandwiches.
Fill in the blank(s) with the appropriate word(s).
Which of the following is an example of the shoeleather costs of inflation?
a. Tito's Restaurant has to print new menus to update its prices compared to other prices in the economy b. Beto sells stocks and earns a real capital gain of $50, but is taxed for the nominal capital gain of $75 c. During Bolivia's hyperinflation, workers rushed to immediately convert their wages from pesos to black-market dollars d. The after-tax real interest rate is lower when inflation is higher