Consider a Perfectly Competitive Firm in the Following Position: Output

question 70

Multiple Choice

Consider a perfectly competitive firm in the following position: output = 4000,market price = $1,total fixed costs = $2000,total variable costs = $4500,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.

---

Definitions:

Perfectly Elastic

A perfectly elastic demand or supply refers to a situation where the quantity demanded or supplied changes infinitely in response to any change in price, represented by a horizontal line on a graph.

Tax Burden

The measure of taxes that an individual or business is required to pay, expressed as a percentage of income or profit.

Tax Increase

A rise in the rate at which individuals or businesses are taxed by the government.

Snickers Candy Bars

A popular brand of candy bar consisting of nougat topped with caramel and peanuts, enrobed in milk chocolate.