At What Output Does a Perfectly Competitive Firm Maximize Its

question 45

Multiple Choice

At what output does a perfectly competitive firm maximize its profit?

• A) when marginal cost equals average total cost
• B) when average cost equals average revenue
• C) when total revenue equals total cost
• D) when marginal cost equals marginal revenue

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Definitions:

Capital Rationing

The process of selecting profitable projects under the constraint of limited available investment funds.

Internal Rate of Return

A financial metric used to evaluate the profitability of an investment, calculated as the discount rate that makes the net present value of all cash flows from the investment equal to zero.

Hurdle Rate

Hurdle Rate is the minimum acceptable return on investment or project that a business requires before it considers it viable or proceeds with it.

Accounting Rate of Return

The return on an investment calculated by dividing the average annual profit by the initial investment cost, typically used to assess the profitability of potential investments.