The Figure Given Below Shows the Revenue and Cost Curves

question 77

Multiple Choice

The figure given below shows the revenue and cost curves of a perfectly competitive firm.Figure 10.5
MC: Marginal cost curve
MR: Marginal revenue curve.ATC: Average-total-cost curve
AVC: Average-variable-cost curve
-If a profit-maximizing, perfectly competitive firm is producing at a loss in the short run, then it implies that:

• A)marginal revenue must be less than marginal cost.
• B)price must be less than the average variable cost.
• C)price must be less than average total cost but greater than average variable cost.
• D)the average revenue curve must lie below the average variable cost curve but above the average fixed cost curve.
• E)price must be less than both average variable cost and average fixed cost.

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Definitions:

Perfectly Elastic

A situation in demand where consumers will buy an infinite quantity of goods at a certain price but none if the price increases even slightly.

Perfectly Inelastic

A demand situation where the quantity demanded does not change regardless of the price level.

Excise Tax

is a tax directly levied on certain goods, services, or activities, often with the intent to reduce their consumption or generate revenue.

Market Price

The current price at which a good or service can be bought or sold in a given market, reflecting supply and demand dynamics.