Which of the following statements is/are TRUE?

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1

Which of the following statements is/are TRUE?

  1. If the market price falls below the Average Fixed Costs (AFC) of production then the firm will minimize losses by “shutting down” production.
  2. A firm will earn an economic profit if it sells output at a market price that exceeds the Average Variable Costs (AVC) of production.
  3. At the current level of production (q) the Marginal Revenue is (MR=) $25 and Marginal Cost is (MC=) $20 the perfectly competitive firm should decrease its’ level of production.
    A. Only Statement (1) is TRUE.
    B. Only Statements (2) and (3) are TRUE.
    C. Only Statement (3) is TRUE.
    D. Only Statements (1) and (3) are TRUE.