If a Perfectly Competitive Firm in the Short Run Can

question 52

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 $2.75 per bushel and a marginal cost of $2.50 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:

Tax Revenue

The income that is gained by governments through taxation, used to fund public services and government obligations.

Excise Tax

A tax levied on specific goods, services, or transactions, often included in the price of products like tobacco, alcohol, and gasoline.

Deadweight Loss

The loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable.

Tax Revenues

The income that is gained by governments through taxation, which is then used to fund public services and infrastructure.