​Consider a Firm Operating in a Perfectly Competitive Market

question 392

Multiple Choice

​Consider a firm operating in a perfectly competitive market. At its current output of 200 units, marginal revenue is $25. At this output, average total cost is decreasing and equals $22. Given this information, what should the firm do?

• A)​Continue to produce 200 units, because this maximizes profits.
• B)​Increase output beyond 200 units, since a higher output will yield the profit maximizing output level.
• C)​Decrease output below 200 units, since a lower output will result in the profit maximizing output level.
• D)​More information is needed to determine the firm's next step.

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