A Certain Competitive Firm Sells Its Output for $20 Per

question 365

Multiple Choice

A certain competitive firm sells its output for $20 per unit.The 50th unit of output that the firm produces has a marginal cost of $22.Which of following is not necessarily true?

• A) Production of the 50th unit of output increases the firm's total revenue by $20.
• B) Production of the 50th unit of output increases the firm's total cost by $22.
• C) Production of the 50th unit of output decreases the firm's profit by $2.
• D) Production of the 50th unit of output increases the firm's average variable cost by $0.44.

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Definitions:

Fixed Manufacturing Overhead

Costs that do not vary with the level of production output and include expenses such as rent, property taxes, and salaries for permanent staff.

Selling Price

The amount a buyer pays to acquire a product or service from a seller.

Net Income

The amount of earnings remaining after all operational, interest, and tax expenses have been deducted from total revenue, reflecting the financial health of a company.

Contribution Margin

The amount remaining from sales revenue after variable costs have been deducted, reflecting the portion of sales that helps cover fixed costs and generate profit.