Suppose Product Price Is $24; MR = MC at Q

question 246

Multiple Choice

Suppose product price is $24; MR = MC at Q = 200; AFC = $6; AVC = $16. What do you advise this competitive price-taker firm to do?

• A) Increase output.
• B) Decrease output.
• C) Shut down operations.
• D) Stay at the current output; the firm is earning a profit of $400.
• E) Stay at the current output even though the firm is losing $200.

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Definitions:

Nonrival Consumption

A characteristic of certain goods where the consumption by one individual does not reduce availability to others, typical of public goods.

Nonexcludable

A characteristic of a good or service that does not allow the provider to prevent its use by individuals who have not paid for it.

Police Officers

Law enforcement personnel responsible for maintaining public order, preventing and detecting crime, and enforcing laws.

Marginal Cost

The cost of producing one additional unit of a good or service, crucial for optimizing production levels and pricing strategies.