Figure 10-2 ​

question 86

Multiple Choice

Figure 10-2
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-In the short run, perfectly competitive firms will determine whether to continue producing the current output, reduce output, or increase output based on the relationship between

• A)price and average cost.
• B)price and marginal cost.
• C)marginal revenue and average cost.
• D)average revenue and average cost.

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Definitions:

Marginal Cost Function

A mathematical representation showing how the cost of producing one additional unit of a good changes as production volume changes.

Optimal Output

The level of production that maximizes a firm’s profit or minimizes its cost under given conditions.

Profit

The financial gain acquired when the revenue generated from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.

Industry Supply Curve

A graph that shows the relationship between the price of a good and the total output of the industry for that good.