Widgets R Us,which Is a Price-Taking Firm,is Currently Producing 250

question 84

Multiple Choice

Widgets R Us,which is a price-taking firm,is currently producing 250 units of output.The market price is $3 per unit,the marginal cost of the 250th unit is $2.75,average total cost is $3.50 per unit,and average variable cost is $2.50 per unit.What advice should you give Widgets R Us?

• A)Increase output to reduce losses.
• B)Continue to produce 250 units in the short run.
• C)Shut down to minimize losses.
• D)Decrease output to 200 units.

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Definitions:

Aggregate Demand

Overall market demand for goods and services in an economy, determined at a prevailing comprehensive price level for a certain duration.

Equilibrium Output

The level of output where the quantity of goods produced equals the quantity of goods consumed, resulting in market equilibrium.

Potential Output

The maximum amount of goods and services an economy can produce when it is most efficiently utilizing all its resources.

Actual Output

The real quantity of goods and services produced by an economy or firm at a given period, regardless of capacity.