The Following Figure Depicts a Firm's Long-Run Average Total Cost

question 17

Multiple Choice

The following figure depicts a firm's long-run average total cost and selected short-run average total cost curves.

-Refer to the figure above.The firm is currently producing at point D.What prevents the firm from producing at E?

• A) Beyond D, the cost of labor becomes too expensive.
• B) The firm can produce at E in the short run but decides not to do so, because at D the firm maximizes profits.
• C) Producing at E is currently impossible, because too much time is needed to gather the level of capital to produce at E.
• D) It is uncertain if producing at E is better than producing at D, because prices are likely to rise in the future.

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing the ownership interest of shareholders.

Retained Earnings

The amount of net earnings remaining for the company after distributing dividends to its shareholders.

Issue Price

The price at which new or existing securities are offered for sale to the public or the primary market.

Stockholders' Equity

Represents the equity interest of a company's shareholders, calculated as assets minus liabilities.