If the Price of a Firm's Product Is $12 and the Firm

question 130

Multiple Choice

If the price of a firm's product is $12 and the firm faces a constant marginal cost of $5 that is equal to its (constant) average total cost, the profit from selling a unit of the firm's product from its inventory is equal to ________ .

• A)$15
• B)$5
• C)$7
• D)$8

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Definitions:

Equilibrium

A state where market supply and demand balance each other, and as a result, prices become stable.

Price-Leadership Model

A market situation where one dominant company sets the price of goods or services within an industry and other companies follow suit.

Nash Equilibrium

In game theory, the result of all players’ playing their best strategy given what their competitors are doing.

Maximin Strategy

A decision rule used in situations of uncertainty to maximize the minimum gain or to minimize the maximum loss.