Suppose That in a Perfectly Competitive Industry, the Market Price

question 1

Multiple Choice

Suppose that in a perfectly competitive industry, the market price of the product is $27. A firm is producing the output level at which average total cost equals marginal cost, both of which are $25. Average variable cost is $23. To maximize profits in the short run, the firm should

• A) leave its output unchanged.
• B) increase its output.
• C) shut down.
• D) reduce its output.
• E) change the price of the product.

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Definitions:

Hypothesis

An “if-then” statement that follows logically from a theory and specifies how certain variables should be related to each other if the theory is correct.

Stereotype Threat

A situational predicament in which individuals are at risk of confirming negative stereotypes about their social group.

Task Performance

The execution and completion level of duties or jobs by an individual or team.

Negatively Stereotyped

Being viewed or categorized in an oversimplified and unfavorable way based on group membership.