A Firm Facing a Downward Sloping Demand Curve Is Producing

question 24

Multiple Choice

A firm facing a downward sloping demand curve is producing a level of output at which price is $7,marginal revenue is $5,and average total cost,which is at its minimum value,is $3.In order to maximize profit,the firm should

• A)decrease price.
• B)keep price the same.
• C)decrease output.
• D)increase price.
• E)both c and d

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Definitions:

Opportunity Costs

The loss of potential gain from other alternatives when one particular option is chosen over them.

Project Analysis

The process of evaluating the potential risks and returns associated with investing in a particular project.

Market Value

The total value of a company or asset in the financial market based on the current price at which it can be bought or sold.

Idle

The state of an asset or resource not being in use, contributing no output or value during a certain period.