Suppose That, at the Current Level of Output, a Firm

question 36

Multiple Choice

Suppose that, at the current level of output, a firm in a perfectly competitive market is producing at a level such that price exceeds marginal cost, P > MC. Marginal cost is normally shaped (U-shaped) . The firm:

• A)is currently maximizing profit since it is charging a price higher than marginal cost.
• B)could increase profit by lowering the level of output.
• C)could increase profit by increasing the level of output.
• D)cannot increase profit without raising price.

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Definitions:

Stock Dividend

An issuance of more shares to investors as a dividend, instead of a cash distribution.

Common Stock

A type of equity security that represents ownership in a corporation, entitling holders to vote on corporate matters and receive dividends.

Balance Sheet

A financial statement that provides a snapshot of a company's financial position, including assets, liabilities, and equity, at a specific point in time.

Residual Dividend Policy

A strategy where a company pays dividends to its shareholders only after all its investment and operational costs are met.