Consider a Perfectly Competitive Firm in the Following Position: Output

question 28

Multiple Choice

Consider a perfectly competitive firm in the following position: output = 4000 units,market price = $1,total fixed costs = $2000,total variable costs = $2000,and marginal cost = $1.To maximize profits the firm should

• A)reduce its output.
• B)expand its output.
• C)produce zero output.
• D)increase the market price.
• E)not change its output.

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Definitions:

Bond Indenture

A legal document that details the terms and conditions between a bond issuer and the bondholders.

Annual Interest Rate

The percentage rate charged on a loan or earned on an investment over the period of one year.

Debt-to-equity Ratio

This financial indicator reveals the relative amounts of debt and equity used by a company to support its asset base.

Issuing Bonds

The process by which a company or government borrows money from investors by selling bonds, a form of long-term debt where the issuer promises to pay back the principal along with interest.