Answer:
d. increase the firm's average variable cost by $0.44.
Explanation:
As we know that in the perfect competitive market, the price of the firm should be equivalent to the marginal revenue
Now the price is $20 per unit
And, the 50th unit, the marginal cost is $22
Now the following results could be shown
a. It is not in profit maximizing output as the marginal revenue would not equivalent to the marginal cost
b. Also at 50th unit, the total revenue would rise by $20
c. In addition to this, the total cost would rise by $22
d. But at the same time the profit would reduced by 2 ($20 - $22)
Therefore the last option would be chosen
Production of the 50th unit of output does not necessarily: d. increase the firm's average variable cost by $0.44.
The statement that is not necessary true is that the production of the 50th unit of output increases the firm's average variable cost by $0.44 calculated as:
Production of the 50th unit of output =Marginal cost/50th units
Production of the 50th unit of output =$22/50
Production of the 50th unit of output =$0.44
The correct statement are:
The output will increases the firm's total revenue by $20 and $22 and the production of the 50th unit of output will decrease the firm's profit by $2 calculated as: ($20-$22).
Inconclusion production of the 50th unit of output does not necessarily: d. increase the firm's average variable cost by $0.44.
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