Changes

<br>(c) MC is at its average

<br>(c) MC is at its average

<br>(d) marginal revenue is at its maximum

<br>(d) marginal revenue is at its maximum

<br>(e) the average total cost is at a minimum

<br>(e) the average total cost is at its minimum

Our test-taking tips encourage us to eliminate wrong answers before trying to select the correct answer.  Let's look at answer choice (a):  the total revenue of the firm cannot be increased.  That is wrong because if we increase our output, we could increase our total revenue, even though we may lose money on that additional unit.  For example, if we sold chocolate candy bars for $1, we could always increase revenue by selling another one for the below-market-price of 50 cents.  We'd lose money on that additional bar, but we'd increase our overall revenue.

Our test-taking tips encourage us to eliminate wrong answers before trying to select the correct answer.  Let's look at answer choice (a):  the total revenue of the firm cannot be increased.  That is wrong because if we increase our output, we could increase our total revenue, even though we may lose money on that additional unit.  For example, if we sold chocolate candy bars for $1, we could always increase revenue by selling another one for the below-market-price of 50 cents.  We'd lose money on that additional bar, but we'd increase our overall revenue.

See how the correct answer fits the question as a key fits a lock.  The question asked about the "long run" equilibrium of a perfectly competitive firm, which suggests the fact that costs are low.  Only answer (e) conveyed how costs are low.  That "unlocks" the question.

See how the correct answer fits the question as a key fits a lock.  The question asked about the "long run" equilibrium of a perfectly competitive firm, which suggests the fact that costs are low.  Only answer (e) conveyed how costs are low.  That "unlocks" the question.

2. Imagine a firm in perfect competition, and in long-run equilibrium.  Which of the following statements is true?

2. Imagine a firm in perfect competition, and in long-run equilibrium.  Which of the following statements is true?

(a)  

(a)