If a Perfectly Competitive Firm Finds That Price Is Less

question 16

Multiple Choice

If a perfectly competitive firm finds that price is less than average variable cost, it should:

• A) not adjust output if marginal cost equals price.
• B) shut down immediately.
• C) increase output until price equals marginal cost.
• D) decrease output until price equals marginal cost.

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Definitions:

Marginal Revenue Curve

A graphical representation showing the additional revenue generated by selling one more unit of a product or service.

Demand Curve

A graph that depicts the relationship between the price of a good or service and the quantity demanded for a given period, typically illustrating an inverse relationship.

Marginal Revenue

The additional income that is generated by increasing product sales by one unit.

Average Revenue

The revenue a company generates per unit of output sold.