Exhibit 22-2 ​

question 165

Multiple Choice

Exhibit 22-2
​

-Refer to Exhibit 22-2. If the firm produces the quantity of output at which marginal revenue (MR) equals marginal cost (MC) , is it guaranteed maximum profit or minimized loss?

• A)Yes, when MR = MC, it follows that MR - MC = 0, and thus the firm maximizes profit and minimizes losses.
• B)No, at the quantity of output at which MR = MC, it could be the case that average variable cost is greater than price and the firm would do better to shut down.
• C)Yes, when the firm produces the quantity at which MR = MC, it has maximized both revenue and profit.
• D)Yes, because if the MC curve is rising, the average total cost curve always lies below it and thus profit is earned.

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Definitions:

Normal Random Variable

A variable that follows a normal distribution, characterized by its mean and standard deviation, representing outcomes with a probabilistic nature.

Standard Deviation

An assessment of the extent to which values in a set are dispersed or varied from the mean, highlighting the differences from the average.

Z-score

A statistical measure that describes the position of a data point in terms of standard deviations from the mean.

Standard Normal Curve

A bell-shaped curve that represents the distribution of data in which the mean is 0 and the standard deviation is 1, used in statistics to represent theoretical distributions.