The Figure Below Shows a Family of Cost Curves for a Firm

question 31

Multiple Choice

The figure below shows a family of cost curves for a firm. The subscripts 1, 2, and 3 for the SRATC curves refer to different plant sizes. FIGURE 8-3
-Refer to Figure 8-3. Should this firm ever consider moving from point E (output level Q₃ onSRATC2) to point F (output level Q5 on SRATC3) ?

• A) Yes, because the firm can take advantage of economies of scale.
• B) Yes, if the product price rises enough to lead the firm to expand to plant size 3.
• C) No, because they are already producing at their lowest possible cost at point E.
• D) No, because producing at point F implies a higher cost per unit of output.
• E) Yes, because SRATC3 is the optimal plant size for this firm.

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Definitions:

Puritan Orthodoxy

The strict adherence to the religious and social practices and beliefs of the Puritans, who sought purity of worship and doctrine, and were influential in the early settlement of New England.

Direct Communication

The process of conveying information or messages between parties without the use of intermediaries or media, ensuring clarity and immediacy in the exchange.

Covenant of Grace

A theological term used in Christian doctrine that denotes an agreement between God and humanity in which salvation is offered through faith in Christ.

Puritan Congregationalists

Members of a Protestant sect that arose in the 16th century advocating strict religious discipline along with the simplification of the ceremonies and creeds of the Church of England.