Figure 13-17

-Refer to Figure 13-17.In the long run, why will the firm produce Qf units and not Qg units, which has a lower its average cost of production?
A)Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss.
B)At Qg, average cost exceeds marginal cost so the firm will actually make a loss.
C)At Qg, 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 a low price and no profit.

Question

Figure 13-17
 
-Refer to Figure 13-17.In the long run, why will the firm produce Qf units and not Qg units, which has a lower its average cost of production?
A)Although its average cost of production is lower when the firm produces Qg units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss. 
B)At Qg, average cost exceeds marginal cost so the firm will actually make a loss. 
C)At Qg, 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 a low price and no profit.

Quizplus · Accepted Answer

Even though the average cost of production is lower at Qg, the firm will have to charge a price below the average cost to sell its output, resulting in a loss. Therefore, the firm will produce Qf units to be able to sell its output at a price that covers its costs and makes a profit.

Figure 13-17 -Refer to Figure 13-17.In the Long Run, Why Will the Run