In Figure 17-4, Below, Initial Demand, Marginal Cost, and Marginal

question 49

Multiple Choice

In Figure 17-4, below, initial demand, marginal cost, and marginal revenue curves (none of them shown) caused the firm to produce the profit-maximizing quantity Y₀ at a price of P0. Now the demand and marginal cost curves have moved to those shown, with the marginal revenue curve running through point L.
Figure 17-4
-In the figure above, the profit-maximizing quantity, in the absence of "menu costs," ________, with profit equal to ________.

• A) remains Y0, J + K
• B) remains Y0, H + K
• C) remains Y0, G + H + J + K
• D) falls to Y1, G + J
• E) falls to Y1, F + G + J

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Definitions:

Profit-Maximizing Output

The level of production that maximizes a firm’s profits, determined by the intersection of marginal cost and marginal revenue.

Total Revenue

The total income earned by a firm from selling its products or services, calculated as the quantity sold multiplied by the selling price.

Marginal Revenue

The additional income earned by selling one more unit of a product or service.

Minimum AVC

The lowest point on the Average Variable Cost curve, indicating the most efficient scale of production where variable costs per unit are minimized.