Figure 7-13 -Figure 7-13 Shows the Average Total Cost Curves of Four

question 177

Multiple Choice

Figure 7-13
-Figure 7-13 shows the average total cost curves of four firms that produce milk.Some of the dairies are more productive.AR = P is the long-run price of milk.How many of these dairies will remain in the industry in the long run?

• A)All of them
• B)Only 2
• C)Only 3
• D)Cannot determine with information given

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Definitions:

Income Effect

The change in consumers' purchasing power and consequently the quantity demanded of a good or service, prompted by a change in real income.

Opportunity Cost

Missing the chance to profit from several alternative options by deciding on one.

Hourly Wage Rate

The amount of money paid for each hour of work, commonly used to compensate employees in many occupations.

Marginal Utility

The augmented enjoyment or usefulness that comes from the consumption of an additional unit of a product or service.