Suppose Your Firm Has a U-Shaped Average Variable Cost Curve

question 126

Multiple Choice

Suppose your firm has a U-shaped average variable cost curve and operates in a perfectly competitive market. If you produce where the product price (marginal revenue) equals average variable cost (on the upward sloping portion of the AVC curve) , then your output will:

• A) exceed the profit-maximizing level of output.
• B) be smaller than the profit-maximizing level of output.
• C) equal the profit-maximizing level of output.
• D) generate zero economic profits.

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