If a Profit-Seeking Competitive Firm Is Producing Its Profit-Maximizing Output

question 7

Multiple Choice

If a profit-seeking competitive firm is producing its profit-maximizing output and its total fixed costs fall by 25 percent, the firm should

• A) use more labor and less capital to produce a larger output.
• B) not change its output.
• C) reduce its output.
• D) increase its output.

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Definitions:

Incremental Value

The additional value generated by undertaking a new project or decision, calculated as the difference between the value with and without the project.