Suppose That in a Perfectly Competitive Industry, the Market Price

question 34

Multiple Choice

Suppose that in a perfectly competitive industry, the market price for the product is $130. A firm is producing the output level at which average total cost equals marginal cost, both of which are $138. Average variable cost is $132. To maximize profits in the short run, the firm should

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

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