Figure 14-4 Suppose a Firm Operating in a Competitive Market Has the Has

question 350

Multiple Choice

Figure 14-4
Suppose a firm operating in a competitive market has the following cost curves:
-Refer to Figure 14-4. When price rises from P2 to P3, the firm finds that

• A)marginal cost exceeds marginal revenue at a production level of Q2.
• B)if it produces at output level Q3 it will earn a positive profit.
• C)expanding output to Q4 would leave the firm with losses.
• D)it could increase profits by lowering output from Q3 to Q2.

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Definitions:

Substitutes

Goods or services that can be used in place of each other to satisfy consumer preferences or needs.

Substitute Product

A good or service that can be used in place of another to satisfy similar needs or desires.

Complements

Products or services that are used together, where the consumption or use of one increases the demand for the other.

Substitutes

Goods or services that can be used in place of each other, satisfying the same needs or desires.