Consider Two Firms,A and B,that Are Producing the Same Product

question 110

Multiple Choice

Consider two firms,A and B,that are producing the same product but with different marginal costs.In this case,

• A)one firm is not maximizing profits.
• B)neither firm is producing its output at the lowest attainable cost.
• C)each firm is being wasteful.
• D)some resources must be unemployed.
• E)a reallocation of output between the firms can lower the industry's total cost.

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Definitions:

Efficiency

The ability to produce maximum output with a given set of inputs or resources, minimizing waste and costs.

Equality

The state of being equal, especially in status, rights, and opportunities.

Output

The complete sum of products or services generated by an individual, device, company, or economic system.

Total Surplus

The aggregate benefit to society, represented by the consumer and producer surplus, from the consumption and production of a good or service.