The Speedy Typesetting Company, a Perfectly Competitive Firm, Is Currently

question 326

Multiple Choice

The Speedy Typesetting Company, a perfectly competitive firm, is currently producing where P = MC and is earning a normal profit. The yearly licensing fee that this firm must pay for the use of a statistical software program was just increased from $1,000 to $1,200. In the short run, this firm will most likely

• A) reduce the amount of output it produces because its cost curves have shifted up and to the left.
• B) continue to produce the same amount of output because only its fixed costs have increased.
• C) produce more units of output to increase revenue to cover the additional fixed costs.
• D) shut down because it will no longer be earning a normal profit.

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Definitions:

Surpluses

Situations in which the quantity of a good or service supplied exceeds the quantity demanded at a specific price, often resulting in excess stock.

Equilibrium Quantity

The quantity of goods or services supplied that is equal to the quantity demanded at the market equilibrium price.

Equilibrium Price

The price point in the market where the amount of products available meets the amount of products consumers want to buy.

Demand

The quantity of a product or service that consumers are willing and able to purchase at various prices over a given period of time.