If a Perfectly Competitive Firm Is Producing a Quantity Where

question 6

Multiple Choice

If a perfectly competitive firm is producing a quantity where P > MC,then the firm can increase profit by:

• A)making no change in output or price because it is already maximizing profit.
• B)increasing the price.
• C)decreasing the price.
• D)increasing production.

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Definitions:

Producer Surplus

The difference between the amount a producer is willing to accept for a good or service versus what they actually receive.

Consumer Surplus

It is the difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually pay.

Market Equilibrium

The state in which market supply and demand balance each other, resulting in stable prices.

Producer Surplus

The difference between the amount a producer is willing to accept for a product versus what they actually receive.