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.