If a Firm Is Maximizing Its Profit and Producing Less

question 8

Multiple Choice

If a firm is maximizing its profit and producing less than the output at which its average total cost is minimized,then that firm

• A) must be suffering an economic loss.
• B) must be earning an economic profit.
• C) has excess capacity.
• D) is producing at its capacity output.
• E) must be earning a normal profit.

---

Definitions:

Stackelberg Model

A strategic game in economics where one firm, the leader, sets its output level first, and then the follower firms set their output levels, taking the leader's output as given.

Oligopoly Model

An economic model that describes a market structure in which a few firms dominate the industry and have the ability to influence prices and market outcomes.

Competitive Market

A market structure in which many firms offer products or services that are similar, leading to high levels of competition.

Remarkable Healing

Significant or extraordinary recovery from illness or injury.