Consider the firm whose MC, AC, AVC, AFC functions are shown in the following graph. (The following is a description of the figure: This figure is a two-axis graph; in the horizontal line we measure output q, and in the vertical line dollars $; there are four curves. The first, MC starts at a positive level when q-0; more precisely, MC(0) is greater than 16 and lower than 30; then MC is decreasing for values of q in between O and 50; at 50 MC has a minimum; this minimum is MC(50)-10; after q-50, MC is increasing; in particular MC(100)-16, MC(120)-30. The second curve, AVC, starts at the same level of MC(O); it is decreasing when q is between O and 100; in this range AVC is above MC; at q-100, AVC crosses MC; more precisely, AVC(100)-MC(100)-16; for q>100, AVC is increasing and below MC. The third curve, AC, has a positive asymptote at zero, that is, it grows to plus infinity when q is very small; AC is decreasing when q is in between O and 120; in this range is above MC; AC(100)-34: AC and MC cross at q 120; more precisely. AC(120)-MC(120)-30; for q>-120, AC is increasing, below MC and above AVC) MC AC 34 16 10 Output 100 120 If the output price is equal to $30, then the firm maximizes profits by producing? O O units O 100 units 125 units O 120 units O 50 units
Consider the firm whose MC, AC, AVC, AFC functions are shown in the following graph. (The following is a description of the figure: This figure is a two-axis graph; in the horizontal line we measure output q, and in the vertical line dollars $; there are four curves. The first, MC starts at a positive level when q-0; more precisely, MC(0) is greater than 16 and lower than 30; then MC is decreasing for values of q in between O and 50; at 50 MC has a minimum; this minimum is MC(50)-10; after q-50, MC is increasing; in particular MC(100)-16, MC(120)-30. The second curve, AVC, starts at the same level of MC(O); it is decreasing when q is between O and 100; in this range AVC is above MC; at q-100, AVC crosses MC; more precisely, AVC(100)-MC(100)-16; for q>100, AVC is increasing and below MC. The third curve, AC, has a positive asymptote at zero, that is, it grows to plus infinity when q is very small; AC is decreasing when q is in between O and 120; in this range is above MC; AC(100)-34: AC and MC cross at q 120; more precisely. AC(120)-MC(120)-30; for q>-120, AC is increasing, below MC and above AVC) MC AC 34 16 10 Output 100 120 If the output price is equal to $30, then the firm maximizes profits by producing? O O units O 100 units 125 units O 120 units O 50 units
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Question 37
Consider the firm whose MC, AC, AVC, AFC functions are shown in the following graph. (The following is a description of the
figure: This figure is a two-axis graph; in the horizontal line we measure output q, and in the vertical line dollars $; there are four
curves. The first, MC starts at a positive level when q=0; more precisely, MC(0) is greater than 16 and lower than 30; then MC is
decreasing for values of q in between 0 and 50; at 50 MC has a minimum; this minimum is MC(50)-10; after q-50, MC is
increasing; in particular MC(100)-16, MC(120)=30. The second curve, AVC, starts at the same level of MC(O); it is decreasing
when q is between O and 100; in this range AVC is above MC; at q-100, AVC crosses MC; more precisely,
AVC(100)-MC(100)-16; for q>100, AVC is increasing and below MC. The third curve, AC, has a positive asymptote at zero, that
is, it grows to plus infinity when q is very small; AC is decreasing when q is in between O and 120; in this range is above MC;
AC(100)-34: AC and MC cross at q-120; more precisely, AC(120)-MC(120)-30; for q>=120, AC is increasing, below MC and
above AVC.)
MC
AC
AVC
34
30
16
10
AF
Output
30
100 120
If the output price is equal to $30, then the firm maximizes profits by producing?
O O units
O 100 units
125 units
O 120 units
O 50 units
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