A Firm Sells a Product in a Purely Competitive Market

question 282

Multiple Choice

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4 and the market price is $4.5. What should the firm do?

• A)shut down if the minimum possible average variable cost is below $4.5
• B)decrease output if the minimum possible average variable cost is below $4.5
• C)increase output if the minimum possible average variable cost is below $4.50
• D)increase output if the minimum possible average variable cost is above $4.5

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Definitions:

New York Stock Exchange

One of the largest stock exchanges in the world by market capitalization, located in New York City.

Leather Jackets

Durable outerwear made from the tanned hide of animals, primarily used for fashion, protection, and in motorcycle attire.

Consumer Income

represents the total earnings received by consumers, including wages, salaries, benefits, and income from investments, influencing their purchasing power.

Soybean

A leguminous plant widely grown for its edible beans which are rich in protein and oil.