If a Perfectly Competitive Firm Finds That the Price Exceeds

question 48

Multiple Choice

If a perfectly competitive firm finds that the price exceeds its ATC, then the firm

• A) will raise its price to increase its economic profit.
• B) will lower its price to increase its economic profit.
• C) is incurring an economic loss.
• D) is making zero economic profit.
• E) is making an economic profit.

---

Definitions:

Factory Heating and Lighting

This refers to the costs associated with heating and illuminating manufacturing facilities, often considered as part of the overhead expenses in product costing.

Product Costs

The costs directly associated with manufacturing a product, including direct materials, direct labor, and overhead.

Sales and Administrative Expenses

Costs associated with the general operation of a company and the sale of its products, excluding production costs.

Factory Overhead

Costs associated with running a factory that are not directly tied to a specific product, including utilities and salaries for management.