A Certain Competitive Firm Sells Its Output for $20 Per

question 139

Multiple Choice

A certain competitive firm sells its output for $20 per unit.The 50th unit of output that the firm produces has a marginal cost of $22.Which of following is not necessarily true?

• A)Production of the 50th unit of output increases the firm's total revenue by $20.
• B)Production of the 50th unit of output increases the firm's total cost by $22.
• C)Production of the 50th unit of output decreases the firm's profit by $2.
• D)Production of the 50th unit of output increases the firm's average variable cost.

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Definitions:

Substitution Effect

The change in the quantity demanded of a good resulting from a change in its price, making it more or less expensive relative to other goods.

Output Effect

The change in total output resulting from a change in the quantity of an input, other factors being held constant.

Substitute Resource

An alternative resource that can be used in place of another to produce similar goods or services.

Marginal Product Curve

A graph that displays the change in output that results from employing an additional unit of a particular input, holding all other inputs constant.