Refer to the Following Figure

question 85

Multiple Choice

Refer to the following figure:

The graph shows demand and marginal cost for a perfectly competitive firm.
-If the firm is producing 100 units of output, increasing output by one unit would ______ the firm's profit by $______.

• A) increase, $3
• B) increase, $2
• C) decrease, $1
• D) increase, $1
• E) decrease, $2

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Definitions:

Surplus

The situation in which the quantity supplied of a good exceeds the quantity demanded at a given price.

Quantity Demanded

The overall quantity of a product or service that buyers are ready to buy at a specific price.

Quantity Supplied

How much of a product or service that sellers are willing and able to transact at a given price level.

Equilibrium Price

The market price at which the quantity of goods supplied is equal to the quantity of goods demanded; it is the price that clears the market.