8. Suppose that at 500 units of output a firm is producing such that marginal re

Question

8. Suppose that at 500 units of output a firm is producing such that marginal revenue is equal to marginal cost. The firm is selling its output at S6 per unit and average total cost at 500 units of output is $5. On the basis of this information we: A) can say that the firm should close down in the short run B) can say that the firm is maximizing profit in the short run C) cannot determine whether the firm should produce or shut down in the short run D) can assume the firm is not using the most efficient technology

Explanation / Answer

Answer
Option B
The profit=(P-ATC)*Q
=(6-5)*500=$500
the firm is maximizing profit because it is producing at MR=MC and the P>AVC

Related Questions

Navigate

• Browse (All)
• Browse 8
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.