A Firm Is Currently Producing at the Point Where MC

question 48

Multiple Choice

A firm is currently producing at the point where MC = MR. The situation for the firm at this point is P = $5, Q = 100, ATC = $6, AVC = $4.50. What do you recommend this firm do?

• A) Increase production above the current output rate, because MC = MR at this rate of output.
• B) Continue to produce the current output rate, because P > AVC.
• C) Shut down, because AVC > P.
• D) Shut down, because ATC > P.

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Definitions:

Assimilating Information

The process of absorbing and integrating new information into one's existing knowledge or understanding.

Adaptation

In Piaget’s theory of cognitive development, the process by which the human mind constructs its knowledge, both assimilating new information to existing knowledge structures or understandings, and accommodating those structures to create a better fit to what is new.

Accommodation

In Piaget’s theory of cognitive development, the adaptation process by which existing knowledge structures are modified somewhat when an individual is exposed to new information.

Infant Cognition

The mental processes by which infants learn to understand and interact with the world around them, including memory and problem-solving abilities.