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:

Consumer Confidence

A measure of how optimistic or pessimistic consumers are regarding their expected financial situation and the overall economy.

Environmental Force

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A significant decline in economic activity spread across the economy, lasting more than a few months.

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The period marked by a significant global financial crisis, often referred to as the Great Recession, characterized by major declines in economic activity worldwide.