A Perfectly Competitive Firm Finds That: Average Total Cost Is

question 211

Multiple Choice

A perfectly competitive firm finds that: Average total cost is $25;
Average variable cost is $15;
Marginal cost is $20 and increasing;
Price of the product is $22.
This firm should

• A)produce more output
• B)raise the price of its product
• C)reduce production without shutting down
• D)shut down (reduce output to zero)
• E)do nothing (it is currently maximizing profit)

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Definitions:

Cognitive Activity

Mental processes involved in gaining knowledge and comprehension, including thinking, knowing, remembering, and problem-solving.

Solving

The process of finding a solution to a problem or challenge through logical reasoning, experimentation, or other methods.

Remembering

The cognitive process of retrieving past experiences, information, and events from the memory store.

Generative

Relating to the capacity to produce or create something, often used in linguistics to refer to the ability of language to generate an infinite number of sentences.