Consider a Small Firm That Is Producing Winter Coats

question 72

Multiple Choice

Consider a small firm that is producing winter coats. It can lease an additional sewing machine for one month for $2400. With this additional machine, the firm can produce an additional 4 coats during that time period that it sells for $550 each. Hiring the marginal machine adds to the firm's profit and so it should _ the machine.

• A) - $200; not lease
• B) $2400; lease
• C) $200; lease
• D) $0; be indifferent as to whether to lease
• E) - $2400; not lease

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Definitions:

Price Per Unit

The cost of a single unit of product, which can be used to compare prices among similar products.

Market Growth Rate

The increase in size or sales of a specific market over a given period, typically expressed as a percentage.

Oligopoly

An oligopoly is a market structure characterized by a small number of firms that control the majority of the market share, leading to limited competition. These firms may engage in competitive or cooperative behaviors.

Monopolistic Competition

A market structure where many firms sell products that are similar but not identical, allowing for some degree of market power and product differentiation.