Suppose a Firm with the Usual U-Shaped Cost Curves Is

question 144

Multiple Choice

Suppose a firm with the usual U-shaped cost curves is producing a level of output such that its short run costs are as follows: ATC = $0.37 per unit
AVC = $0.32 per unit
AFC = $0.05 per unit
MC = $0.43 per unit
Given these short run costs,which of the following statements is true?

• A)The firm is operating with excess capacity.
• B)The firm is operating at capacity.
• C)The firm is operating above capacity.
• D)The firm has no capacity constraints.
• E)The firm is producing a level of output where capacity is increasing.

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Definitions:

Budget Line

A graphical representation showing the combination of two goods that a consumer can afford given their income and the prices of the goods.

Going Prices

Going prices refer to the current rates or charges for goods and services in a market.

Utility Function

A mathematical representation of how different quantities of goods or services can provide varying levels of satisfaction or utility to an individual.

Labor Income

Earnings obtained from employment, including wages, salaries, and benefits.