Consider Three Firms, A, B and C, All Producing Kilos

question 7

Multiple Choice

Consider three firms, A, B and C, all producing kilos of potatoes (per year) in a perfectly competitive market. The diagrams below show marginal cost curves for each of the three firms. FIGURE 12- 1
-Refer to Figure 12- 1. Suppose each of Firms A, B, and C are producing 500 kilos of potatoes. Is this industry productively efficient?

• A) It is not possible to say whether this industry is productively efficient because we do not know the market price of the product.
• B) No, because marginal costs are not equated for all firms.
• C) Yes, because output is equated for all firms.
• D) No, because the marginal cost curve for each firm has a different slope.
• E) No, because each firm could easily produce more than 500 kilos.

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