If a Firm Is Producing Where Its LMC = Price

question 52

Multiple Choice

If a firm is producing where its LMC = price and the LMC is equal to LAC, then it would do better in the long run by

• A)Increasing output with its existing plant until LMC equals price
• B)Increasing plant size until LMC and SAC are identical and equal to price
• C)Decreasing plant size until LAC, SAC and price are equal
• D)Changing nothing because it is already at the long run profit maximizing point

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Definitions:

Acquired Firm

A company that has been purchased and taken over by another company.

Substitutes

are products or services that can replace or be used in place of another, catering to similar needs or functionalities, often influencing consumer choices and market dynamics.

Substitute Good

A product or service that can be used in place of another to satisfy similar needs or demands.

Market Power

The ability of a company or group of companies to control prices and total market output in an industry or sector.