Suppose a Perfectly Competitive Firm Can Produce 20,000 Bushels of Corn

question 157

Multiple Choice

Suppose a perfectly competitive firm can produce 20,000 bushels of corn a year at an output at which marginal cost equals marginal revenue. The market price of corn per bushel is $2.00. The firm's total costs per year are $50,000 and fixed costs per year are $25,000. In the short run, this firm should

• A) shut down.
• B) continue producing until the price of corn increases.
• C) produce 20,000 bushels of corn because, although they are losing money, they are losing less than if they shut down.
• D) produce 40,000 bushels to try to increase economic profit.

---

Definitions:

Central Bank

The main monetary authority of a country, which regulates the supply of money and interest rates, aiming to maintain price stability and economic growth.

Inflation

A measure of the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

Inflation Rate

The rate at which the overall cost of goods and services in an economy increases over time.

Tax Rate

The percentage at which an individual or corporation is taxed by the government on income or profits.