The Diagram Below Shows the Market Demand Curve and the Cost

question 90

Multiple Choice

The diagram below shows the market demand curve and the cost curves for a single firm.
FIGURE 12- 6
-Refer to Figure 12- 6.Suppose this firm is being regulated using the policy of marginal- cost pricing.The resulting price and output would be

• A)P1 and Q1.
• B)P2 and Q2.
• C)P1 and Q2.
• D)P3 and Q2.
• E)P3 and Q1.

---

Definitions:

Average Variable Cost

The cost per unit of production that varies with the level of output, calculated by dividing the total variable costs by the number of units produced.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production inputs.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.

Marginal Revenue

The additional income generated from selling one more unit of a good or service.