This Figure Shows the Long-Run Average Total Cost Curve for a Firm

question 116

Multiple Choice

This figure shows the long-run average total cost curve for a firm that produces basketballs, along with four short-run average total cost curves. Each of the short-run average total cost curves corresponds to a different plant size. SRATC₁ corresponds to Plant size 1, SRATC₂ corresponds to Plant size 2, and so forth.
FIGURE 7-5

-Refer to Figure 7-5. What is the total cost of producing 500 basketballs per week, assuming the firm uses the optimal plant size for producing that quantity of output?

• A) $500
• B) $5000
• C) $13 500
• D) $22 500

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Definitions:

Price Skimming

A pricing strategy involving setting high prices at the launch of a new product to maximize profits from customers willing to pay more, before reducing the price over time.

Consumer Credit

Credit extended by retailers to the ultimate customers for the purchase of products or services.

Business Credit

A measure of a company's ability to obtain goods, services, or funds based on the promise to pay in the future.

Trade Credit

The purchase of goods from suppliers that do not demand payment immediately.