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

question 39

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. Keeping total output unchanged, what level of output should each firm be producing such that the industry is productively efficient?

• A) Firm A: 500 kilos, Firm B: 800 kilos, Firm C: 200 kilos
• B) Firm A: 200 kilos, Firm B: 500 kilos, Firm C: 800 kilos
• C) Firm A: 500 kilos, Firm B: 200 kilos, Firm C: 200 kilos
• D) Firm A: 500 kilos, Firm B: 500 kilos, Firm C: 500 kilos
• E) Firm A: 700 kilos, Firm B: 800 kilos, Firm C: 0 kilos

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Definitions:

Standard Costs

Predetermined cost estimates used to measure the cost performance of an operation, allowing for budgeting and variance analysis against actual costs.

Standard Price

A predetermined cost of a resource or product, used for budgeting and cost control purposes.

Standard Quantity

A predetermined amount of input that should be used in producing a unit of output.

Standard Costs

Predetermined costs for manufacturing a product or service, used as a benchmark to measure the actual costs of production.