A Firm Operates in a Perfectly Competitive Industry

question 271

Multiple Choice

A firm operates in a perfectly competitive industry. At the current level of output, the marginal cost is $26 and the average cost is $23. If the firm can sell its product for $25, the

• A) firm should produce more units.
• B) firm is maximizing its profits at the current level of output.
• C) firm should decrease its output.
• D) firm's average total cost is falling.

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Definitions:

Validity

The extent to which a concept, conclusion, or measurement is well-founded and likely corresponds accurately to the real world.

Statement

A formal account or declaration of financial position or transactions, or a declaration of facts or opinions.

Company

A legal entity formed by individuals, stockholders, or shareholders, with the purpose of operating for profit, engaging in commercial and industrial activities.

Straight-Line Amortization

A method of allocating the cost of an intangible asset evenly over its useful life.