If the Short-Run Marginal Costs of Producing a Good Are

question 7

Multiple Choice

If the short-run marginal costs of producing a good are $20 for the first 400 units and $30 for each additional unit beyond 400, then in the short run, if the market price of output is $21, a profit-maximizing firm will

• A)produce a level of output where marginal revenue equals marginal costs.
• B)not produce at all, since marginal costs are increasing.
• C)produce up to the point where average costs equal $21.
• D)produce as much output as possible since there are constant returns to scale.
• E)produce exactly 400 units.

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Definitions:

Social Security Taxes

Taxes levied on both employers and employees to fund the Social Security program, used for providing retirement, disability, and survivor benefits.

Medicare Taxes

Taxes withheld from employees' paychecks and matched by employers to fund the Medicare program.

Vacation Pay Payable

A liability account representing the amount of vacation pay owed to employees that has not yet been paid.

Current Liability

A financial obligation that a company is required to pay within a year, such as accounts payable, short-term loans, and accrued expenses.