Consider the Following Cost Curves for Two Perfectly Competitive Firms

question 28

Multiple Choice

Consider the following cost curves for two perfectly competitive firms, A and B. FIGURE 9- 4
-Refer to Figure 9- 4. If Firm B is producing at output level q2, and selling its output at p0, then Firm B should

• A) shut down because at this price and output level the firm is suffering losses.
• B) expand output to q0 so that profits will be maximized.
• C) remain at this output level because profits are maximized when SRAVC is at its minimum.
• D) expand output to q1 because profits are maximized when SRATC is at its minimum.

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Definitions:

Serrations

The tooth-like projections found on the edge of a tool, such as a knife or saw, designed to make cutting more efficient.

Fasting

A practice of voluntarily abstaining from all or some kinds of food or drink, usually for a specific period of time, often practiced for religious, health, or medical reasons.

Nausea

A feeling of sickness with an inclination to vomit, often a symptom of other conditions or side effects of medication.

Vomiting

The forceful expulsion of stomach contents through the mouth, which can be a symptom of various conditions or diseases.