-The Above Figure Shows the Demand and Cost Curves for a Firm

question 100

Multiple Choice

-The above figure shows the demand and cost curves for a firm in monopolistic competition in the long run. The firm maximizes its profit by

• A) producing 4 units and charging a price of $15.
• B) producing 8 units and charging a price of $5.
• C) producing 16 units and charging a price of $10.
• D) None of the above answers is correct.

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Definitions:

Shutdown Point

The level of operations where a company's revenue from goods or services sold just covers its variable costs, beyond which it becomes more cost-effective to halt production.

Short Run

A period in which at least one input, such as plant size or capital, is fixed and cannot be varied to change output levels.

Long Run

A time frame in economics where all inputs and costs are variable, allowing for full adjustment to changes.

Peak Efficiency

The maximum performance level at which a system, process, or machine operates with optimal effectiveness and minimal waste.