A Firm Sells a Product in a Purely Competitive Market

question 167

Multiple Choice

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 200 units is $4.00. The average variable cost is $3.50. The market price of the product is $3.00. To maximize profits or minimize losses, the firm should

• A)continue to produce 200 units.
• B)continue production, but produce less than 200 units.
• C)increase production to more than 200 units.
• D)shut down.

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Definitions:

Supply Chain

A network of businesses and activities involved in the creation and delivery of a product or service from the raw material stage through to the end customer.

Scope of Strategic Fit

Concerns the alignment between a company's operational capabilities and its strategic goals, ensuring that operations are geared towards achieving long-term objectives.

Supply Chain

A series of steps involved in getting a product or service from the supplier to the customer, encompassing production, handling, storage, and distribution.

Intercompany Scope

Relates to operations or activities that occur between or involve more than one company within the same corporate structure.