Suppose a Price-Taking Firm Produces 400 Units at Its Optimal

question 199

Multiple Choice

Suppose a price-taking firm produces 400 units at its optimal output level.At that output rate,marginal cost is $200,average total cost is $240,and average variable cost is $170.The firm will be forced to go out of business in the short run if _____

• A)the market price equals $200 per unit.
• B)the market price is between $170 per unit and $240 per unit.
• C)the market price falls below $170 per unit.
• D)the market price is between $200 per unit and $240 per unit.
• E)the market price equals $240 per unit.

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Definitions:

Mark-up

An increase in the original price of items meant to compensate for overhead expenditures and ensure profit.

Selling Price

The amount of money for which a product or service is sold to the consumer.

Overhead Expenses

Ongoing costs involved in operating a business that are not directly tied to providing goods or services, such as rent, utilities, and administration costs.

Profit

The financial gain obtained when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.