Refer to Figure 13-17. In the long run, why will the firm produce Qf units and not Qg units, which has a lower its average cost of production?
A) At Qg, marginal revenue is less than average revenue which will result in a loss for the firm.
B) Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss.
C) At Qg, average cost exceeds marginal cost so the firm will actually make a loss.
D) The firm's goal is to charge a high price and make a small profit rather than a low price and no profit.
B
You might also like to view...
Which of the following would shift the aggregate demand curve to the left?
A. An increase in exports. B. An increase in investment. C. An increase in government spending. D. A decrease in government spending.
What would likely happen to the long-run aggregate supply curve if the U.S. federal government decreases marginal tax rates on wages?
A. The LRAS curve would shift leftward. B. The LRAS curve would remain stable while the AD curve would shift leftward. C. The LRAS curve would shift rightward. D. The LRAS curve would remain stable while the AD curve would shift rightward.