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AP® Microeconomics

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Moderate

Tim's Firm: Profit or Loss?

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Tim’s firm operates in a perfectly competitive industry. Let’s assume that in producing his product, Tim’s firm sees the following cost relationships at his current point of production:

$MR=MC$ at \$16

$AVC = \$12$

$ATC = \$20$

Which of the following accurately identifies what Tim will experience?

A

Tim will realize a profit of $8 per unit of output.

B

Tim will realize a profit of $4 per unit of output.

C

Tim will maximize his profit by producing in the short run.

D

Tim will minimize his losses by producing in the short run.

E

Tim will shut down in the short run.