At Its Current Level of Quantity, a Perfectly Competitive Firm's

question 41

Multiple Choice

At its current level of quantity, a perfectly competitive firm's marginal revenue is $3.25, its short- run marginal cost is $3.25 and its long- run marginal cost is $3.00. Which of the following statements is true?

• A)The firm should increase its production to maximize profit in the short- run.
• B)The firm is maximizing its long- run profit, but not its short- run profit.
• C)The firm should decrease its production to maximize profit in the short- run.
• D)The firm is maximizing its short- run profit, but not its long- run profit.

---

Definitions:

Depreciation Tax Shield

An approach to reduce taxable income through the allowance for depreciation, thus saving on taxes.

Lessee's Cost

Lessee's cost involves the expenses borne by a lessee, including lease payments, maintenance, and other costs related to the leased asset.

Tax-oriented Lease

A lease structured in a way that allows the lessor to claim tax benefits, such as depreciation deductions and tax credits, which are then typically passed on to the lessee in the form of lower lease payments.

Financial Lease

A lease agreement in which the lessee assumes both the risks and rewards of asset ownership, often with an option to purchase the asset at the end of the lease term.