A Firm Sells a Product in a Purely Competitive Market

question 254

Multiple Choice

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1,000 units is $2.5. The minimum possible average variable cost is $2. The market price of the product is $2.5. To maximize profits or minimize losses, the firm should

• A)continue producing 1,000 units.
• B)continue production, but reduce output.
• C)increase production.
• D)shut down.

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Definitions:

Trailer Suspension

The system of springs, shock absorbers, or air bags that supports the load and improves the ride of a towed trailer.

Kingpin Bushing

A component in a vehicle's steering mechanism that provides a pivot point for the steering knuckle, ensuring smooth turning.

Freeplay

The amount of slack or movement allowed in a part or mechanism before engagement or resistance begins, often critical in mechanical linkages and controls.

Dial Indicator

A precision measuring tool used to measure small distances or angles with high accuracy.