Question 4
Theory of ProductionA firm is at its optimum size when
- A.it produces the greatest output at the minimum cost
- B.it has a motive to increase output
- C.marginal cost equals marginal revenue
- D.marginal cost is less than marginal revenue
Show the answer and explanation
Answer: A (it produces the greatest output at the minimum cost)
Explanation
The optimum size of a firm is the size at which its average cost of production is lowest, so it gets the most output at the least cost per unit.