If the Price Exceeds the Average Variable Cost, by Producing

question 269

Multiple Choice

If the price exceeds the average variable cost, by producing the level of output such that marginal revenue equals marginal cost, the firm ensures that it will

• A) earn an economic profit.
• B) not suffer any losses.
• C) earn the largest profit possible.
• D) survive in the long run.

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Definitions:

Base-Rate Information

This term relates to how often an event occurs within a general population.

Representativeness Heuristic

A mental shortcut that involves making judgments about the probability of an event under uncertainty, based on how much it resembles existing prototypes.

Algorithm

A set of rules or procedures for solving a problem in a finite number of steps, often used in computer programming.

Base-Rate Information

Statistical data that indicates the prevalence of a particular phenomenon in a given population.