The Following Table Gives the Average Cost of Production for Three

question 37

Multiple Choice

The following table gives the average cost of production for three different categories of firms producing the same product.

$$\begin{array} { | c | c | c | c | } \hline \begin{array} { c } \text { Type of } \\\text { firme }\end{array} & \begin{array} { c } \text { No. of } \\\text { firms }\end{array} & \begin{array} { c } \text { Awerane } \\\text { sostper } \\\text { unit }\end{array} & \begin{array} { c } \text { Equilibrium } \\\text { output }\end{array} \\\hline \hline \text { A } & 350 & \$ 3 & 10 \text { units } \\\text { B } & 400 & \$ 5 & 10 \text { units } \\\text { C } & 550 & \$ 10 & 10 \text { units } \\\hline\end{array}$$
-Refer to Table .Suppose the demand for the commodity rises from 3,200 units to 3,500 units and the market price increases to $5.Which of the following situations will be observed?

• A)Type A will supply 3,200 units and earn normal profits while Type B will supply the remaining at a loss.
• B)Type A and Type B firms will jointly supply 3,500 units and both will break even.
• C)Type A firms will supply 3,200 units and Type B will supply the rest.
• D)Type A firms will supply 3,500 units and earn supernormal profit.

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Definitions:

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The variation, either increase or decrease, in the amount of money earned by individuals or households over time.

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A measure of how the quantity demanded of a good or service changes in response to a change in its price.

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