A Firm Is Currently Producing at the Point Where MC

question 32

Multiple Choice

A firm is currently producing at the point where MC = MR. The situation for the firm at this point is P = $5, Q = 100, ATC = $6, AVC = $5.50. What do you recommend this firm do?

• A) Increase production above the current output rate, because MC = MR at this rate of output.
• B) Continue to produce the current output rate, because P > AVC.
• C) Shut down, because AVC > P.
• D) Shut down, because ATC > P.

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Definitions:

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The ability to effectively understand others at work and to use such knowledge to influence others to act in ways that enhance one’s personal or organizational objectives.

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