If a firm's average cost is declining, setting price equal to marginal cost will
A)maximize the firm's profits.
B)minimize the firm's losses.
C)guarantee that the firm will lose money.
D)help the firm earn the opportunity costs of its resources.

Question

Quizplus · Accepted Answer

When average cost is declining, it means that the firm is experiencing economies of scale. Setting price equal to marginal cost in this situation will result in a price that is below average cost, leading to losses.

If a Firm's Average Cost Is Declining, Setting Price Equal