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Toby operates a small deli downtown.The deli industry is monopolistically competitive.Toby is producing the quantity that minimizes his average total cost.Assuming that Toby is maximizing profits,his:
A) marginal cost is less than his average total cost.
B) marginal cost is less than his marginal revenue.
C) price equals his average total cost.
D) price is more than his average total cost.
Marginal Cost
This represents the extra expense of manufacturing or producing an additional item, highlighting the concept of decreasing efficiency with increased production volume.
Marginal Revenue
The additional income earned by selling one more unit of a product or service.
Average Total Cost
The total cost divided by the quantity produced, indicating the average cost per unit of output.
- Understand the relationship between price, average total cost, and marginal cost in determining a firm’s economic profits or losses.
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Learning Objectives
- Understand the relationship between price, average total cost, and marginal cost in determining a firm’s economic profits or losses.
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