Asked by
Cyril Jay Malana
on Dec 11, 2024Verified
A local business sells its product for $40 each in a competitive price-taker market. At its present rate of output, its marginal cost is $40, average variable cost is $45, and average total cost is $60. The business should
A) increase output
B) reduce output but not to zero
C) maintain the present rate of output
D) shut down
E) raise the price
Marginal Cost
The increase in total cost that arises from producing one additional unit of a good or service.
Average Variable Cost
The total variable costs divided by the quantity of output produced; it varies with output levels.
Average Total Cost
The per-unit production cost, calculated by dividing the overall production expenses by the number of units produced.
- Examine the impact of variations in a company's production volume on its earnings within a competitive landscape.
Verified Answer
AR
Learning Objectives
- Examine the impact of variations in a company's production volume on its earnings within a competitive landscape.