The Graph Below Depicts the Cost Structure for a Firm

question 55

Multiple Choice

The graph below depicts the cost structure for a firm in a competitive market.
Figure 9-13

Refer to Figure 9-13. When price rises from P₂ to P₃, the firm finds that

• A) marginal cost exceeds marginal revenue at a production level of Q₂.
• B) if it produces at output level Q₃ it will earn a positive profit.
• C) expanding output to Q₄ would leave the firm with losses.
• D) it could increase profits by lowering output from Q₃ to Q₂.

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Definitions:

Business-Expense Tax Deduction

A reduction in taxable income for businesses, for costs that are considered necessary and ordinary in running the business.

Fair Labor Standards Act

U.S. legislation aimed at protecting workers against unfair pay and excessive working hours, establishing minimum wage and overtime pay guidelines.

Personal Breaks

Short periods of time during the workday that employees are allowed to take for personal needs, not including lunch breaks.

Compensate Employees

This refers to the various ways an employer can provide payment or benefits to their workers for the services rendered, including salaries, wages, bonuses, and benefits.