Suppose a Firm in a Competitive Market Produces and Sells

question 267

Multiple Choice

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, the average revenue of the 200th unit will be

• A)less than $12.
• B)more than $12.
• C)$12.
• D)Any of the above may be correct depending on the price elasticity of demand for the product.

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Definitions:

Opportunity Cost Of Capital

The potential return that is forfeited when one investment is chosen over another.

Return On Assets

A measure of a corporation's profitability, indicating how efficient it is in using its assets to produce profit.

Capital Base

The amount of capital that a company or financial institution has available for conducting its operations, typically consisting of equity and debt.

Quality Of Earnings

An assessment of how accurately a company's reported income reflects its true earning capacity, and if it's indicative of its future financial performance.