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:

First Cause

A philosophical concept suggesting that everything has a cause, and there must be an initial uncaused cause that started the chain of events in the universe.

Always Existed

A concept referring to something that has had no beginning, and has been in existence for an infinite amount of time.

Baruch Spinoza

A Dutch philosopher of Portuguese Sephardi origin, known for his work in ethics, epistemology, and metaphysics, emphasizing monism – the idea that there is only one substance in the universe.

Pantheism

The belief that God is identical with creation. Baruch Spinoza, for example, was a pantheist. Hinduism, in some interpretations, can be construed as a form of pantheism.