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    Economics multiple choice

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    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

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    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 ...

    $2.49

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