Afirm producing good y recently increased monthly production from 1,500 units to 2,000 units. this had no impact on the market price of good y. at the new production level of 2,000 units, thefirm's average cost is $3.5 while its marginal cost of production is $4. the marginal revenue however is fixed at $5 for all levels of output. jake williamson is the operations head of the firm. jake feels that, since the firm has the capacity, it should have increased production further to 2,500 units which would have maximized profits. on the other hand, mathew hayden of the market research team anticipates an increase in price to $5.5 in the near future. he therefore claims that the firm may not be maximizing economic profit in the short run even at 2,500 units.
which of the following is most strongly implied by thisinformation?
a. at the current level of production, the firm is making a profit of $3,000.
b. the current price of good y is equal to $4.
c. mathew feels that the demand curve faced by the firm will shift downward.
d. jake thinks that at the production level of 2,500 units, the average cost of producing y will be equal to the market price.
e. the demand curve currently faced by the firm is horizontal at$4.
Answers: 3
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