Figure 10.17 -Refer to Figure 10.17.In the long run, why will the firm produce Q_f units and not Q_gunits, which has a lower average cost of production? A)Although its average cost of production is lower when the firm produces Q_gunits, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. B)At Q_g, average cost exceeds marginal cost so the firm will actually incur a loss. C)At Q_g, marginal revenue is less than average revenue, which will result in a loss for the firm. D)The firm's goal is to charge a high price and make a small profit rather than charge a low price and make no profit.

Question

Quizplus · Accepted Answer

Although Q_g has a lower average cost of production, the firm would have to charge a price below average cost, which will result in a loss. Therefore, Q_f is the optimal production level in the long run.

Figure 10.17 -Refer to Figure 10.17.In the Long Run, Why Will the Why