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:

Salary

A fixed regular payment, typically paid on a monthly or biweekly basis, made by an employer to an employee, especially a professional or white-collar worker.

Warranty Liability

An obligation recognized by a company to repair, replace, or compensate for defective goods sold to customers.

Warranty Contracts

Legal agreements providing a promise to repair or replace a product if it fails within a specified period.

Contingent Liability

A potential obligation that may arise in the future depending on the occurrence of a certain event.