A perfectly competitive firm faces a market clearing price of $150 per unit. Average total costs are at the minimum value of $200 per unit at an output rate of 100 units. Average variable costs are at the minimum value of $100 per unit at an output rate
of 50 units. Marginal cost equals $150 per unit at an output rate of 75 units. It can be concluded that the short-run profit-maximizing output rate is
A) 75 units, at which the firm earns zero economic profits per unit sold.
B) 75 units, at which the firm earns negative economic profits per unit sold.
C) 75 units, at which the firm earns positive economic profits per unit sold.
D) 50 units, because price is less than average variable costs.
Answer: B
You might also like to view...
Which of the following is true?
a. The GDP gap is the difference between actual real GDP and full-employment real GDP. b. We desire economic growth because it increases the nation's standard of living. c. Economic growth is measured by the annual percentage increase in a nation's real GDP. d. Discouraged workers are a reason critics say the unemployment rate is understated. e. All of these are true.
The market wage could be higher than the equilibrium wage if a worker
a. belongs to a labor union. b. is covered by a minimum-wage law. c. is paid an efficiency wage. d. All of the above are correct.