Consider the Total Cost and Revenue Curves Shown Below, for Two

question 20

Multiple Choice

Consider the total cost and revenue curves shown below, for two perfectly competitive firms, Firm A and Firm B. FIGURE 9- 5
-Refer to Figure 9- 5. Given its total cost and revenue curves, Firm A should

• A) maximize its profits by producing that level of output such that the slope of the TC curve is equal to the slope of the TR curve.
• B) shut down.
• C) maximize its profits by producing that level of output such that the slope of the TVC curve is equal to the slope of the TR curve.
• D) continue production, as it is earning positive profits.
• E) build another plant to reap scale economies.

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Definitions:

Amortized

The process of paying off a debt with a fixed repayment schedule in regular installments over a period of time.

Loan Payments

The regular payments made to repay borrowed money, typically including both principal and interest components.

Amortized

A process of paying off debt in regular installments over a period of time, where each payment is partially principal and partially interest.

Compounded Semi-annually

Refers to the process of calculating interest on both the initial principal and the accumulated interest from previous periods twice a year.