Question

A profit-maximizing firm in a competitive market is currently producing 200 units of output. It has average revenue of $9 and average total cost of $7. It follows that the firm's A) Average total cost curve intersects the marginal cost curve at an output level of less than 200 units. B) Average variable cost curve intersects the marginal cost curve at an output level of less than 200 units. C) Profit is $400. D) All of the above are correct. Refer to Table 2. For this firm, the average revenue from selling 3 units is A) $12. B) $4. C) $3. D) $1.

Answer 1

Answer:

It breaks down on two parts to be fully explained.

Explanation:

Part 1

The correct answer is:

The D option (All of the above are correct) which applies perfectly in the firms of competitive markets.  

Part 2

Referred to Table 2.

For this firm, the average revenue from selling 3 units is A) $12. B) $4. C) $3. D) $1.

Table 2

The reference to table 2 represents a demand curve faced by a firm in a competitive market.

Price Quantity

$4         0

$4         1

$4         2

$4         3

$4         4

$4         5

The correct answer is:

The B option ($ 4)  which it would represent the overall average revenue from selling 3 units.