Consider the Following Cost Curves for Two Perfectly Competitive Firms

question 66

Multiple Choice

Consider the following cost curves for two perfectly competitive firms, A and B. FIGURE 9-4
-Refer to Figure 9-4. If Firm B is producing at output level Q₂, and selling its output at p0, then FirmB should

• A) shut down because at this price and output level the firm is suffering losses.
• B) expand output to q0 so that profits will be maximized.
• C) remain at this output level because profits are maximized when SRAVC is at its minimum.
• D) expand output to Q₁ because profits are maximized when SRATC is at its minimum.

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Definitions:

Compulsion

An irresistible urge to perform an irrational or harmful act.

Hallucination

A sensory experience of something that does not exist outside the mind, often seen, heard, or felt.

Anxiety Reaction

An emotional and physiological response to stress characterized by feelings of tension, worried thoughts, and physical changes like increased blood pressure.

Obsession

An intrusive and persistent thought, urge, or image that repeatedly enters the mind, often causing distress.