Scenario: There are two firms producing ball point pens in a perfectly competitive industry. The market price of one pen is $5. Firm A has a lower…

Scenario: There are two firms producing ball point pens in a perfectly competitive industry. The market price of one pen is $5. Firm A has a lower marginal cost than Firm B. The following graphs illustrate the marginal cost curves of both the firms.Refer to the scenario above. Which of the following statements is true?

A.

At the optimal level of production, total costs of production are maximized.

B.

Even though both firms have different marginal costs, the optimal quantity produced will be the same for both firms.

C.

No government intervention is required to reach the optimal outcome.

D.

If the production of both firms isequal, social surplus increases.

Leave a Reply