Asked by Zachary Siegel on Apr 27, 2024
Verified
Suppose a pizza restaurant has two pizza ovens that may be used to bake pizzas, so the restaurant has a maximum capacity constraint that affects the shape of the firm's short-run marginal cost curve. What happens to maximum capacity segment of this curve if the firm adds another pizza oven?
A) Shifts upward
B) Shifts downward
C) Shifts leftward
D) Shifts rightward
Marginal Cost Curve
A graphical representation showing how the cost of producing one additional unit changes as production volume increases.
Maximum Capacity
The highest level of output or activity that a facility, system, or machine can achieve under normal conditions.
- Understand the impact of changes in production capacity on cost curves and firm's costs.
Verified Answer
LL
Levina LairensiaApr 29, 2024
Final Answer :
D
Explanation :
Adding another pizza oven will increase the maximum capacity of the restaurant, which means the firm can produce more pizzas at a lower cost per unit. This means that the maximum capacity segment of the short-run marginal cost curve will shift to the right.
Learning Objectives
- Understand the impact of changes in production capacity on cost curves and firm's costs.