Consider the Demand Curves Facing Two Firms: for Curve 1

question 117

Multiple Choice

Consider the demand curves facing two firms: For curve 1, a $4 decrease in price increases quantity demanded by 2 units. For curve 2, a $3 decrease in price increases quantity demanded by 1 unit. Curve _____ is steeper, so an expansion of output drives down marginal revenue more along _____.

• A) 2; curve 2 than curve 1
• B) 2; curve 1 than curve 2
• C) 1; curve 1 than curve 2
• D) 1; curve 2 than curve 1

---

Definitions:

Marginal Cost

The cost incurred by producing one more unit of a good or service.

Marginal Revenue

The increase in revenue that results from the sale of one additional unit of a product or service.

Average Total Cost

The total cost of production divided by the total quantity produced, representing the average cost per unit of output.

Implicit Costs

The opportunity costs of using resources owned by the business for its operations, not directly paid out in cash.