As Long as It Does NOT Shut Down, a Profit-Maximizing

question 106

Multiple Choice

As long as it does NOT shut down, a profit-maximizing perfectly competitive firm will

• A) always earn an economic profit.
• B) produce so that marginal revenue equals marginal cost.
• C) produce so that price equals average cost.
• D) never set its price equal to its marginal revenue.

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Definitions:

Inelastic Demand

Refers to a market situation where the demand for a product does not change significantly in response to a change in price.

Elastic Demand

A market scenario where the quantity demanded of a product or service significantly changes in response to a change in price.

Fast-Food

Quick service restaurants serving food that is prepared and served rapidly.

Consumer Surplus

The benefit obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay.