A Company Produces at an Output Level Where Marginal Revenue

question 106

Multiple Choice

A company produces at an output level where marginal revenue is equal to marginal cost and has the following revenue and cost levels:
Marginal cost curve intersects the average variable cost curve at $150.
Marginal cost curve intersects the average total cost curve at $200.
Marginal cost curve intersects the marginal revenue curve at $170.
What would you suggest this firm should do in the short run?

• A) The firm should continue to produce at a profit level of $20 per unit.
• B) The firm should continue to produce at a profit level of $30 per unit.
• C) The firm should continue to produce at a profit level of $50 per unit.
• D) The firm should shut down.
• E) The firm should continue to produce at a loss.

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Definitions:

Assault

A civil wrong that occurs when one person intentionally and voluntarily places another in fear or apprehension of an immediate, offensive physical harm. Assault does not require actual contact.

Private Nuisance

A nuisance that affects only a single individual or a very limited number of individuals.

Strict-Liability Tort

A civil wrong that occurs when a defendant takes an action that is inherently dangerous and cannot ever be undertaken safely, no matter what precautions the defendant takes. The defendant is liable for the plaintiff’s damages without any requirement that the plaintiff prove that the defendant was negligent.

Intention

The state of having a purpose or plan in mind when doing something.