Suppose a Firm in a Competitive Market Increase Its Output

question 71

Multiple Choice

Suppose a firm in a competitive market increase its output by 25 per cent, the price of its output is likely to:

• A)decrease by more than 25 per cent
• B)increase by more than 25 per cent
• C)remain unchanged
• D)this cannot be determined without information on the firm's costs

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Definitions:

Capital

Financial assets or the financial value of assets, such as cash and goods, used to fund a company's operations and growth.

Creditors

Individuals, businesses, or other entities that are owed money because they have provided goods, services, or loans to another entity.

Stockholders' Equity

The residual interest in the assets of a company after deducting liabilities, represented by the shareholders' investment and retained earnings.

Bond Offering

The process of issuing bonds to investors as a way of raising capital, where the issuer owes the holders a debt.