When a Firm's Demand Curve Is Tangent to Its Average

question 543

Multiple Choice

When a firm's demand curve is tangent to its average total cost curve, the

• A)firm's economic profit is zero.
• B)firm must be earning economic profits.
• C)firm must be incurring economic losses.
• D)firm must be operating at its efficient scale.

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Definitions:

Output

The total amount of goods or services produced by a company, industry, or economy over a specific period of time.

Least-Cost Combination

is an economic principle where firms aim to produce a given output at the minimum possible cost by choosing the optimal combination of inputs.

Purely Competitive Conditions

Purely competitive conditions describe a market situation where numerous small firms compete against each other, selling homogeneous products, with no single firm able to influence market prices.

MU

MU typically stands for Marginal Utility, which is the additional satisfaction or utility that a consumer receives from consuming one more unit of a good or service.