If the Short-Run Marginal Costs of Producing a Good Are

question 7

Multiple Choice

If the short-run marginal costs of producing a good are $20 for the first 400 units and $30 for each additional unit beyond 400, then in the short run, if the market price of output is $21, a profit-maximizing firm will

• A)produce a level of output where marginal revenue equals marginal costs.
• B)not produce at all, since marginal costs are increasing.
• C)produce up to the point where average costs equal $21.
• D)produce as much output as possible since there are constant returns to scale.
• E)produce exactly 400 units.

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Definitions:

Strategies

Plans or methods developed to achieve a goal or solve a problem.

Nash Equilibrium

A concept within game theory where no participant can gain by unilaterally changing their strategy if the strategies of the others remain unchanged.

Optimal Strategy

The best or most efficient course of action to achieve a specific goal or maximize a particular set of outcomes under given conditions.

Nash Equilibrium

A concept in game theory where no player can benefit by changing strategies if the other players keep their strategies unchanged.