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JAMB Economics 1994 Question 17

Question 17

Theory of Costs and Revenue

A firm determines its profits when it studies its

  1. A.Marginal Cost
  2. B.Average Cost
  3. C.Total Cost
  4. D.Average Cost relative to price in the market
Show the answer and explanation

Answer: D (Average Cost relative to price in the market)

Explanation

Profit per unit is price minus average cost, so the firm compares its average cost with the market price.