If a Competitive Firm Has a U-Shaped Marginal Cost Curve

question 23

Multiple Choice

If a competitive firm has a U-shaped marginal cost curve then:

• A) the profit-maximizing output will always generate positive economic profit.
• B) the profit-maximizing output will always generate positive producer surplus.
• C) the profit-maximizing output is found where MC = MR and MC is decreasing.
• D) the profit-maximizing output is found where MC = MR and MC is constant.
• E) the profit-maximizing output is found where MC = MR and MC is increasing.

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Definitions:

Production Possibility

An economic model that shows the maximum combination of goods or services that can be produced with a given set of resources.

Current State

The present condition or situation of a system, process, or subject of study.

Technology

The use of scientific understanding for functional aims, particularly within the industrial sector.

Motorcycles

Two-wheeled vehicles powered by an engine, designed for individual or small number passenger transport.