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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