(Question 4 refers to the chart below) 9,000 8.000 7,000 6,000 2,000 1,000 reven

Question

(Question 4 refers to the chart below) 9,000 8.000 7,000 6,000 2,000 1,000 revenu Quantity of cars, Q -1,000 0 10 20 30 40 5o 60 70 80 4. Given this car manufacture's marginal cost curve and marginal revenue curve, which of the following is true? a. When Q-40, marginal cost is greater than the marginal revenue, so the firm's profit must be negative b. Revenue is greater when Q=10 than if Q=20. c. The firm would not choose to produce at point E because marginal profit is zero. d. Profit is greater when Q-20 than when Q=10. e. Average total cost (not shown), must be at a minimum when Q-30

Explanation / Answer

a. True

b. False

c. False. At E, MC=MR, which means the profit is maximum

d. True

e. Because profit is maximum where MC=MR and ATC is at its minimum

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