A Competitive Firm Has Been Selling Its Output for $10

question 319

Multiple Choice

A competitive firm has been selling its output for $10 per unit and has been maximizing its profit. Then, the price rises to $14, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its

• A)marginal revenue is lower than it was previously.
• B)marginal cost is lower than it was previously.
• C)quantity of output is higher than it was previously.
• D)All of the above are correct.

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Definitions:

Directional Long Funds

Investment funds that aim to profit from an anticipated upward movement in the price of the assets they hold.

Betas

A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

Equity Hedge Funds

Hedge funds that primarily invest in stocks in order to gain from an expected increase in equity prices.

Systematic Risk

The inherent risk that affects the entire market or market segment, often referred to as market risk or un-diversifiable risk.