-Adherence to Marginal Cost Pricing in Figure 27

question 10

Multiple Choice

-Adherence to marginal cost pricing in Figure 27.1 will necessitate

• A)Taxing away the economic profits that will be realized.
• B)Giving the firm a subsidy.
• C)Regulation of the firm's profits.

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Definitions:

AVC

Average Variable Cost, the cost that varies with the level of output, divided by the quantity of output produced.

Total Fixed Cost

The sum of all costs that do not change with the level of output produced; these costs are incurred even if production is zero.

Marginal Cost

The increase in cost resulting from the production of one additional unit of a good.

Variable Cost

Costs that change in proportion to the level of activity or volume of production in a company.