If a Perfectly Competitive Firm Is Producing Where Its MR=MC

question 73

Multiple Choice

If a perfectly competitive firm is producing where its MR=MC, but is operating to the left of the minimum point of its LRAC curve,

• A) it can still be in long- run equilibrium as long as P = SRATC.
• B) it cannot be optimizing its short- run behaviour.
• C) it is in a long- run profit maximizing position.
• D) it can reduce its average costs by building a larger plant.
• E) its profits will decrease if it builds a larger plant.

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Definitions:

Marginal Product

The additional output that can be produced by adding one more unit of a specific input, keeping all others constant.

Bushel of Wheat

A unit of measure for volumes of wheat, commonly used in agriculture, equivalent to approximately 60 pounds in the United States.

Profit-Maximizing Quantity

The level of production at which a firm can achieve the highest possible profit, determined by the intersection of marginal cost and marginal revenue.

Power Cords

Electrical cables used to connect an appliance or device to the main electricity supply.