Use the Following to Answer Questions

question 54

Multiple Choice

Use the following to answer questions:
Figure: Long-Run and Short-Run Average Cost Curves
-(Figure: Long-Run and Short-Run Average Cost Curves) Look at the figure Long-Run and Short-Run Average Cost Curves. If a firm faced the long-run average total cost curve shown in the figure and it expected to produce 100,000 units of the good in the long run, the firm should build the plant associated with:

• A) ATC₁.
• B) ATC₂.
• C) ATC₃.
• D) ATC₁ or ATC₂.

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Definitions:

Real Balance Effect

An economic theory suggesting that inflation or deflation changes individuals' purchasing power, affecting their real income and consumption patterns.

Marginal Utility

The additional satisfaction or utility gained by consuming one more unit of a good or service.

Total Utility

The total satisfaction received from consuming a given total quantity of a good or service.

Marginal Utility

The change in satisfaction or benefit derived from consuming an additional unit of a good or service.