If the Minimum Efficient Scale in Woodstove Production Is 100

question 118

Multiple Choice

If the minimum efficient scale in woodstove production is 100, 000 units per year,

• A)the average cost of producing 50, 000 stoves is greater than the average cost of producing 100, 000
• B)the average cost of producing 50, 000 stoves is equal to the average cost of producing 100, 000
• C)the total cost of producing 50, 000 stoves is greater than the total cost of producing 100, 000
• D)the firm should not produce more than 100, 000 woodstoves
• E)MC exceeds AC at 100, 000 stoves

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Definitions:

Prices

The sum needed to buy a product or service, shaped by aspects such as the availability of the item and the desire for it from consumers.

Economic Activity

Actions that involve the production, distribution, and consumption of goods and services within an economy.

Market Economy

An economic system where supply and demand from consumers and businesses drive the production and allocation of resources and services, with minimal government intervention.

Market Failure

A circumstance where goods and services are distributed ineffectively by a market operating without restrictions, commonly leading to a decline in social welfare.