Using the above graph, this firm maximizes profits (or minimizes losses) by prod

Question

Using the above graph, this firm maximizes profits (or minimizes losses) by producing a quantity of about units. A. 150 B. 200 C. 250 D. 300 Using the above graph, if this firm produces at its most efficient output level it would produce at about units. A. 150 B. 200 C. 250 D. 300 You can conclude from the above graph that A. new firms will enter the industry. B. existing firms will leave the industry. C. the industry is in long run equilibrium. D. it is unclear whether the industry is in the short run or the long run.

Explanation / Answer

(18) (C)

A firm maximizes profits by equating MR with MC, and in graph, MR = MC when Q = 250

(19) (A)

At efficient output level, firms produces at lowest point of ATC (for productive efficiency). This occurs at Q = 150

(20) (A)

When MR = MC for profit maximization, Price > ATC, signifying short run excess profit, attracted by which, new firms will enter the market.

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