(Figure: Profit-Maximizing Quantity and Price II) Which of the Following

question 55

Multiple Choice

(Figure: Profit-maximizing Quantity and Price II) Which of the following statements is (are) TRUE? I. If the firm is producing 5 units of output, it should expand output to increase profits because P > MC.
II) At a price of $16, the firm's profits would rise if it raised its price.
III) The profit-maximizing quantity is 600 units.
IV) The profit-maximizing price is $13.

• A) I and III
• B) IV
• C) II
• D) III

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Definitions:

Lottery

A lottery is a form of gambling which involves drawing lots for a prize, or the allocation of a resource or a chance event resulting in a significant gain to the holder.

Von Neumann-Morgenstern

A theory of expected utility that serves as a foundational framework in the field of game theory, describing strategies for rational decision-making under uncertainty.

Expected Utility

The sum of the utilities associated with all possible outcomes, weighted by the probability of each outcome occurring.

Probability

The quantification of the probability that an event will happen, represented by a number ranging from 0 to 1, with 0 signifying an impossible event and 1 signifying a certain event.