The Following Figure Shows the Marginal Cost Curve (MC) for a Firm

question 21

Multiple Choice

The following figure shows the marginal cost curve (MC) for a firm producing fancy dolls for children.The market price for a doll is $4 per unit.


-Refer to Figure .If the market price declined to $1 per doll, which of the following statements will be true?

• A)The firm is unlikely to produce because the marginal cost of production is higher than $1.
• B)The firm will produce less than 2,000 dolls in a month.
• C)The profit from producing in the range where price is greater than marginal cost is unlikely to cover the loss of the initial levels of production.
• D)The firm will earn high revenue as quantity demanded of dolls in the market rises substantially.

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