Question

In: Economics

If a firm is producing its output where MR=MC, but is suffering (economic) losses, then it...

If a firm is producing its output where MR=MC, but is suffering (economic) losses, then it must be the case that

a) price is less than average total cost.

b) price exceeds marginal cost.

c) price is less than average variable cost.

d) price equals marginal revenue.

Solutions

Expert Solution

Ans) the correct option is a) price is less than average total cost.

When average total cost exceeds price, the firm incurs losses


Related Solutions

explain why both monopolies and perfectly competitive firms produce the output where MR=MC. since MR=MC for...
explain why both monopolies and perfectly competitive firms produce the output where MR=MC. since MR=MC for both monopolies and perfectly competitive firms, why is the profit-maximizing price based on MR=MC higher than MC for the monopoly but equal to MC for perfect competition?
Answer the following questions: a. Suppose that a firm is producing where 0 < MR <...
Answer the following questions: a. Suppose that a firm is producing where 0 < MR < MC. What would happen to total revenue, total cost, and profit if the firm produced one less unit of output? b. Suppose that a firm is producing where MR > MC. What would happen to total revenue, total cost, and profit if the firm produced one more unit of output? c. If a firm produces the next unit of output, total revenue rises from...
1)If a perfectly competitive firm is producing a quantity where P < MC, then profit: Group...
1)If a perfectly competitive firm is producing a quantity where P < MC, then profit: Group of answer choices a)can be increased by increasing production. b)is maximized. c)can be increased by decreasing the price. d)can be increased by decreasing production. 2)Which of the following accurately explains why firms in perfectly competitive markets are price takers? Group of answer choices a)prices in perfectly competitive markets are set by government regulation. b)prices in perfectly competitive markets are determined by the costs of...
A firm is currently producing 80 units of output. At this level of output produced: its...
A firm is currently producing 80 units of output. At this level of output produced: its average total cost is 100 (ATC = 100 ) The market price per unit of output is 120 MR = 40 MC = 20 i. Is this firm making profits or losses? How much? ii. Are they maximum profits? Why? iii. If your answer to part ii was no, what does this firm have to do with maximize its profits? A firm's total cost...
Assume the market for coffee mugs is perfectly competitive. Firms in the market are producing output, but are currently making economic losses.
Assume the market for coffee mugs is perfectly competitive. Firms in the market are producing output, but are currently making economic losses.How does the price of coffee mugs compare to the average total cost, the average variable cost, and the marginal cost of producing coffee mugs?Draw two graphs, side by side, illustrating the present situation for the typical firm and in the market.Assuming there is no change in either market demand or the firms’ cost curves,explain what will happen in...
11. A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will
11. A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue willA) rise and its total variable cost will rise even more.B) rise and its total variable cost will rise, but not by as much.C) fall but its total variable cost will rise.D) fall and its total variable cost will fall, but not by as much.12. Bob's Lawn Care Services is a perfectly competitive...
Allocative efficiency requires producing where P=MC. Clearly explain why any other output level is does not...
Allocative efficiency requires producing where P=MC. Clearly explain why any other output level is does not have allocative efficiency.
1.If the firm is producing at a quantity of output where marginal cost exceeds marginal revenue,...
1.If the firm is producing at a quantity of output where marginal cost exceeds marginal revenue, then ________. (there can be multiple answers.) A)the firm should reduce production B)each marginal unit adds profit by bringing in more revenue than its cost C)the firm's perceived demand will shift to the left D)the excess profit would attract additional competition 2.In what way(s) is a monopolistically competitive firm inefficient?(there can be multiple answers.) A) It does not produce at the minimum of its...
A competitive firm has a marginal cost equal to: MC(y)=3y, where y is the output level....
A competitive firm has a marginal cost equal to: MC(y)=3y, where y is the output level. The intersection of the average cost and the marginal cost happens at output level equal to 4. How much will the firm produce in the long-run at price equal to $9?
In the course of producing its output, a firm causes pollution. The government passes a law...
In the course of producing its output, a firm causes pollution. The government passes a law that requires the firm to stop polluting, and the firm dis-covers that it can prevent the pollution by hiring x workers for every worker that is producing output. That is, if the firm hires N workers, then xN workers are required to clean up the pollution caused by the N workers who are actually producing output. Deter-mine the effects of the pollution regulation on...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT