For a Certain Firm,the 100th Unit of Output That the Firm

question 27

Multiple Choice

For a certain firm,the 100th unit of output that the firm produces has a marginal revenue of $10 and a marginal cost of $7.Which statement best explains the firm's profit-maximizing decision

• A)The production of the 100th unit of output increases the firm's profit by $3.
• B)The production of the 100th unit of output increases the firm's average total cost by $7.
• C)The firm's profit-maximizing level of output is less than 100 units.
• D)The firm is maximizing profits at the 100th unit of output.

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Definitions:

Economies of Scale

The economic gains achieved by businesses because of their large scale, volume of production, or extent of operations, which usually results in a reduction in the cost per unit as the scale of operation grows.

Cost-output Elasticity

Cost-output elasticity measures the responsiveness of the cost of producing a good to a change in the output level, indicating how costs change as production scales.

Marginal Cost

The increase in expenditure resulting from the production of an additional unit of a good or service.

Short-run Cost Function

The relationship between the cost of production and the level of output when at least one input is fixed in the short term.