Suppose a Perfectly Competitive Firm's Minimum Average Variable Cost Is

question 103

Multiple Choice

Suppose a perfectly competitive firm's minimum average variable cost is $3 when it produces 50. If the price is $2 and the firm's marginal cost is $2, the firm should

• A) continue to produce 50.
• B) continue to produce, but produce less than 50.
• C) shut down.
• D) continue to produce, but produce more than 50.
• E) continue to operate, but to determine the amount of production requires more information than is given.

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Definitions:

Analytic Cognitive Style

A way of thinking that emphasizes logical analysis, precision, and systematic evaluation of information.

Holistic

An approach that emphasizes the importance of the whole and the interdependence of its parts.

Confirmation Bias

The tendency to search for, interpret, favor, and recall information that confirms one’s preexisting beliefs or hypotheses.

Emotional Valence

Emotional valence refers to the intrinsic attractiveness(positive) or averseness(negative) of an event, object, or situation.