In the Long Run,a Profit-Maximizing Firm Producing a Given Level

question 81

Multiple Choice

In the long run,a profit-maximizing firm producing a given level of output chooses the production method that

• A)produces that output at the lowest possible cost.
• B)maximizes the marginal product of all factors.
• C)maximizes the marginal product of labour.
• D)leads to a flat total cost curve.
• E)MINIMIZES LABOUR INPUT.

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Definitions:

Total Fixed Cost

The sum of all costs that do not change with the level of output or activity over a short period, such as rent, salaries, and equipment maintenance costs.

Average Total Cost

The total cost of production divided by the number of units produced.

Implicit Costs

The opportunity costs of using resources owned by the firm for its project instead of selling or renting them to others.

Fixed Costs

Costs that do not vary with the level of production or output, such as rent, salaries, and insurance.