Consider a firm with the following cost information: ATC = $15, AVC = $12, and MC = $14. If we know that this firm has decided to produce Q = 20 by following the rule to maximize profits or minimize losses, then the price of the output is:
A) $12.
B) $14.
C) $15.
D) $20.

Question

Quizplus · Accepted Answer

To maximize profits or minimize losses, a firm will produce where MC = MR (Marginal Cost = Marginal Revenue). Given that the firm has decided to produce, it means price (P) must be at least equal to or greater than AVC to cover variable costs. Since MC = $14 and firms produce where P = MC in competitive markets, the price of the output is $14.

Consider a Firm with the Following Cost Information: ATC =