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:

Cross-price Elasticity

A measure of how the quantity demanded of one good responds to a change in price of another good, indicating the degree of substitutability or complementarity between the two goods.

Good W

A hypothetical product or service used in economic examples or theories to discuss various economic principles.

Good Y

Typically used in economic models, it represents a generic secondary good in contrast to another good, often labeled as Good X.

Rationing Device

A mechanism used to distribute scarce goods and services among competing uses or users.