A Firm Sells a Product in a Purely Competitive Market

question 87

Multiple Choice

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 800 units is $3.50. The minimum possible average variable cost is $2.00. The market price of the product is $4.00. To maximize profits or minimize losses, the firm should

• A)continue producing 800 units.
• B)continue production, but reduce output.
• C)increase production.
• D)shut down.

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Definitions:

Generates Output

The process of producing or delivering a result, product, or service from a set of inputs or processes.

Undertaking Project

The process of planning, executing, and completing a project with specific goals and objectives.

Value Resources

These are assets or materials that are considered important or beneficial for a company or individual to achieve economic success or meet economic needs.