Refer to the scenario above. The average total cost of Firm A ...

[dmcintosh]

Refer to the scenario above. The average total cost of Firm A when it produces 100 pens is 3, and the average total cost of Firm B when it produces 50 pens is 7. At these levels of production, which of the following statements is true?
 
  A) Both firms incur losses.
  B) Firm A incurs a loss but Firm B makes a profit.
  C) Firm B incurs a loss but Firm A makes a profit.
  D) Both firms make profits.

Question 2

A horizontal merger is a merger between firms
 
  A) earning roughly the same amount of profit.
  B) producing roughly the same products.
  C) regularly doing business of any sort with each other.
  D) standing in a supplier-purchaser relationship.
  E) that were previously independent.

[ApricotDream]

Answer to Question 1

C

Answer to Question 2

B