Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves:
-Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that
A)fixed costs decrease as output increases from Q3 to Q4.
B)it can earn a positive profit by increasing production to Q4.
C)profit is still maximized at a production level of Q3.
D)average revenue exceeds marginal revenue at a production level of Q4.

Question

Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves: 
-Refer to Figure 14-4. When price rises from P3 to P4, the firm finds that
A)fixed costs decrease as output increases from Q3 to Q4. 
B)it can earn a positive profit by increasing production to Q4. 
C)profit is still maximized at a production level of Q3. 
D)average revenue exceeds marginal revenue at a production level of Q4.

Quizplus · Accepted Answer

When the price rises from P3 to P4, the firm can increase production to Q4 to earn a positive profit, as the higher price allows for covering costs and potentially earning a profit.

Figure 14-4 Suppose a Firm Operating in a Competitive Market Has the Has