If a Purely Competitive Firm Is Maximizing Economic Profit

question 13

Multiple Choice

If a purely competitive firm is maximizing economic profit,

• A)it is necessarily maximizing per-unit profit.
• B)it may or may not be maximizing per-unit profit.
• C)then per-unit profit will be minimized.
• D)it is necessarily overallocating resources to its product.

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Definitions:

Variable Cost

Costs that change in proportion to the level of activity or volume of goods produced.

Fixed Costs

Costs that do not change with the volume of production, such as rent, salaries, or insurance.

Contribution Margin

The difference between sales revenue and variable costs of a product or service, used to cover fixed costs and to generate profit.

Fixed Costs

Costs that do not change with the level of production or business activity, such as rent, salaries, and insurance premiums.