Suppose Your Firm Operates in a Perfectly Competitive Market and Decides

question 97

Multiple Choice

Suppose your firm operates in a perfectly competitive market and decides to double its output. How does this affect the firm's marginal profit?

• A) Marginal revenue and marginal cost increase
• B) Marginal revenue increases but marginal cost remains the same
• C) Marginal cost may change but marginal revenue remains the same
• D) Marginal revenue and marginal cost decrease

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Definitions:

External Financing

Funds that a business obtains from outside sources to cover its operational needs and finance growth, including debt and equity financing.

Internal

Pertaining to activities, operations, or factors that occur or exist within an organization or entity.

Full Capacity

The maximum level of output that a company can produce under normal conditions over a given time period.