If a Perfectly Competitive Firm in the Short Run Can

question 11

Multiple Choice

If a perfectly competitive firm in the short run can sell its output at $2.50 per bushel and it has an average variable cost of $1.75 per bushel and a marginal cost of $0.85 per bushel,it should

• A) expand output.
• B) raise its price.
• C) cut output to zero.
• D) advertise.
• E) do nothing at all; it is currently maximizing profits.

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Definitions:

Maturity Stage

The final phase in a product's lifecycle or a bond's life where growth stabilizes, sales level off, and a bond becomes due for payment.

Profit Margins

Financial metrics indicating the percentage of revenue that remains as profit after accounting for costs and expenses.

Industry Life Cycle

The industry life cycle describes the progression of an industry over time through phases including introduction, growth, maturity, and decline, each affecting competitive dynamics and strategic considerations for businesses.

Highest Return

The maximum gain or profit achieved from an investment over a specific period.