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:

Reciprocal

Involving a mutual or two-way exchange or influence between two or more parties.

Experiential Tasks

activities designed to engage participants through direct experience and learning by doing.

Incremental Change

Gradual alterations or modifications made over time to processes, policies, or products.

Observational

Relating to the acquisition of knowledge that is obtained by observing and studying subjects without influencing them.