Consider the Following Short-Run Cost Curves for a Profit-Maximizing Firm

question 2

Multiple Choice

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry. FIGURE 9-2
-Refer to Figure 9-2.The short-run supply curve for the industry in which this firm operates is

• A)the MC curve at or above a price of $1.50.
• B)the AVC curve at or above a price of $1.50.
• C)the entire MC curve.
• D)the MC curve at or above a price of $3.
• E)not determinable from the information provided.

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Definitions:

Midpoint Formula

In economics, it is often used to calculate the price elasticity of demand by comparing the percentage change in quantity demanded to the percentage change in price.

Price Elasticity

An index of how sensitive the amount of a product that is bought or sold is to variations in its cost.

Total Revenue

The overall amount of money generated by the sale of goods or services before any costs are subtracted.

Price Effect

The impact on consumer demand and producer behavior due to a change in the price of a good or service, holding other factors constant.