A Perfectly Competitive Firm Has an 80 Percent Probability of a High

question 93

Multiple Choice

A perfectly competitive firm has an 80 percent probability of a high demand of $10 and a 20 percent chance of a low demand of $8. To maximize expected profit, the firm should produce the quantity that sets the marginal cost equal to_______ .

• A)$9.20
• B)$8.00
• C)$10.00
• D)$9.60

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Definitions:

Industrially Advanced Economies

Countries that are highly developed with significant industrial growth, sophisticated technology, and strong infrastructure, typically experiencing high standards of living.

Highly Elastic

refers to the sensitivity of demand or supply to changes in price or other factors, where a small change can cause a significant change in the quantity demanded or supplied.

Highly Inelastic

Describes a situation where supply or demand for a product or service is relatively unresponsive to changes in price.

Unit Elasticity

A situation where a change in the price of a good or service results in a proportional change in the quantity demanded or supplied.