If a Perfectly Competitive Firm Can Sell a Bushel of Soybeans

question 217

Multiple Choice

If a perfectly competitive firm can sell a bushel of soybeans for $25, has an average variable cost of $26 per bushel, and has a marginal cost of $26 per bushel, the profit-maximizing firm should

• A) expand output.
• B) reduce output.
• C) increase price.
• D) cut output to zero.

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Definitions:

Market Price

The price at which an asset or service is traded in the open market.

Treasury Bills

Short-term government securities issued at a discount from the face value and maturing at par, representing a form of borrowing by the government.

Real Rate Of Return

The annual percentage return realized on an investment, adjusted for changes in the price level due to inflation or other external factors.

Inflation

The speed at which the overall price level for goods and services increases, gradually diminishing the buying power.