Figure 13-17 -Refer to Figure 13-17. in the Long Run, Why Will

question 223

Multiple Choice

Figure 13-17
-Refer to Figure 13-17. In the long run, why will the firm produce Q_f units and not Q_g units, which has a lower its average cost of production?

• A) Although its average cost of production is lower when the firm produces Q_g units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss.
• B) At Q_g, average cost exceeds marginal cost so the firm will actually make a loss.
• C) At Q_g, marginal revenue is less than average revenue which will result in a loss for the firm.
• D) The firm's goal is to charge a high price and make a small profit rather than a low price and no profit.

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Definitions:

Statute of Limitations

Laws that set the maximum time within which legal proceedings can be initiated after an event occurred which gives rise to the prosecution.

Bilateral Contracts

Agreements involving two parties where each commits to performing a specific act in exchange for the other's performance.

Promised Action

An agreed-upon deed or activity that a party has committed to perform in the scope of a contract or agreement.

Set of Promises

A collection or aggregation of commitments or assurances made by one party to another within the context of a contract or agreement.