-If an average cost pricing rule is imposed on the firm in the figure above, the firm will produce
A) 500 units per day.
B) 600 units per day.
C) 900 units per day.
D) zero units.

Question

-If an average cost pricing rule is imposed on the firm in the figure above, the firm will produce
A) 500 units per day. 
B) 600 units per day. 
C) 900 units per day. 
D) zero units.

Quizplus · Accepted Answer

An average cost pricing rule means the firm sets its price equal to the average cost. This typically results in the firm producing at a level where the average cost curve intersects the demand curve, which is often at a higher output level than profit-maximizing output. In this scenario, it is 600 units per day.

-If an Average Cost Pricing Rule Is Imposed on the Firm