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Economics multiple choice

Which level indicates the point of maximum economic efficiency?

Lowest point on AC curve
Lowest point on AVC curve
Lowest point on MC curve
None of the above

A monopoly will usually produce

where its demand curve is inelastic
where its demand curve is elastic
where its demand curve is either elastic or inelastic
only when its demand curve is perfectly inelastic

If a perfectly competitive firm incurs an economic loss, it should

shut down immediately
try to raise its price
shut down in the long run
shut down if this loss exceeds fixed costs

A high degree of operating leverage will

cause a company's profit to fluctuate more widely as sales revenue changes.
cause a company's profit to fluctuate less widely as sales revenue changes.
cause profits to be high.
cause profits to be low.

Economies of scale is indicated by

declining long run AVC
declining long run AFC
declining long run AC
None of the above

Solution Preview

Maximum efficiency occurs when the firm produces at the lowest point on the average cost curve (AC), implying it cannot produce the goods any less expensively.

A monopoly will produce where its demand curve is ...

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