Refer to the Following Figure

question 12

Multiple Choice

Refer to the following figure:

The figure above shows cost curves for a perfectly competitive firm.
-Suppose that market price is $2.60. A firm producing 800 units of output

• A) is earning the maximum amount of profit, $880.
• B) is earning the maximum amount of profit, $2,080.
• C) should produce 500 units of output instead, to earn profits of $500.
• D) should produce 1100 units of output instead, to earn profits of $1,100.
• E) should shut down

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Definitions:

FV

Future Value, the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.

Compound Interest

Interest calculated on the initial principal of a deposit or loan, as well as on the accumulated interest from previous periods.

Interest on Interest

The interest earned on the reinvestment of previous interest payments, commonly associated with compounding interest.

Reinvestment

The process of using dividends, interest, or any form of return earnings to purchase additional shares or units instead of receiving the earnings in cash.