Assume Robbie's Robots Operates in a Perfectly Competitive Market Producing

question 31

Multiple Choice

Assume Robbie's Robots operates in a perfectly competitive market producing 3,000 robots per day. At this output level, the selling price is $800 per robot and the marginal cost is $625 per robot. To maximize profits, Robbie's Robots should

• A) make no adjustments as they are already maximizing their profits.
• B) increase their output.
• C) decrease their output.
• D) stop producing since it is earning a loss.

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Definitions:

Market Price

The existing rate at which a product or service may be purchased or sold within a market environment.

Competitive Market

A market structure where many firms offer products or services that are similar, leading to high levels of competition.

Perfectly Competitive

A market structure characterized by a large number of small firms, homogenous products, and free entry and exit, leading to optimal distribution of resources.

MR = MC

An economic principle where the marginal revenue (MR) equals the marginal cost (MC), often used as a condition for profit maximization.