QUESTION 1 points Saved A competitive firm operating in the short run is produci

ID: 1106924 • Letter: Q

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QUESTION 1 points Saved A competitive firm operating in the short run is producing at the output level at which ATC is at a minimum, if ATC-$8 and MR-$9, to maximize profits for minimize losses), this firm should OA. reduce output. O B. ncrease output OC. increase price. 0 D, do nothing; the firm is already maximizing profits. QUESTION 2 1 points Save Answer A perfectly competitive firm's supply curve is its marginal cost curve above the average variable cost curve. O True O False QUESTION 3 1 points / Saved According to the optimal output rule, profits are maximized when firms produce where the difference between marginal revenue and marginal cost is the largest. O True O False QUESTION 4 1 points Save Answer Explain how the long-run perfectly competitive equilibrium is efficient Path: Words:D Click Save and Subnit to save and submit. Click Save All Answers to save all onswers Save All Answers Save and Submit

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Question 1

It has been stated that firm is producing the level of output at which ATC is at its minimum. The ATC at this level of output is $8. So, minimum ATC is $8.

When ATC is at its minimum, it is equal to MC.

So, MC at current level of output is also $8.

The MR at current level of output is also $8.

To maximize profit, firm should produce that level of output at which MR equals MC.

At current level of output, MR is greater than MC. So, firm is not producing profit-maximizing level of output.

It must increase production because this will bring increase in MC and should keep increasing production till MR equals MC so that firm can reach profit-maximizing level of output.

So, this firm should increase output.

Hence, the correct answer is the option (B).

Question 2

In case of perfectly competitve firm, the rising portion of marginal cost curve that liesabove the minimum point of average variable cost curve acts as its supply curve.

Thus, the given statement is True.

Hence, the correct answer is the option (1).

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