Use the Following to Answer Questions

question 64

Multiple Choice

Use the following to answer questions:
Figure: Demand and Supply
-(Figure: Demand and Supply) Refer to the figure. Which statement is TRUE?

• A) The gains from trade are maximized at 20 units of output.
• B) At 16 units of output, there are unexploited gains from trade.
• C) Buyers are willing to pay $20 for the 16th unit of output and it costs sellers $60 to produce that unit.
• D) A free market is likely to produce less than 12 units of output.

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Definitions:

Economic Loss

A situation where total costs exceed total revenues, indicating that a firm is not covering its opportunity costs.

Accounting Profit

The calculated income of a business or company after subtracting all explicit costs from total revenues.

Average Variable Cost

Calculated by dividing the total variable costs by the quantity of output produced, representing the variable cost per unit of output.

MR = MC

The condition where marginal revenue equals marginal cost, often used to determine the profit-maximizing output level for a firm.