Which of the Following Firms Is Most Likely to Have

question 272

Multiple Choice

Which of the following firms is most likely to have a constant marginal cost?

• A) A firm that is a price-taker
• B) A firm that has extremely high fixed costs
• C) A firm that has extremely high variable costs
• D) A firm that faces a horizontal demand curve

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Definitions:

Additional Unit

Referring to the next or extra unit of a product or service to be produced or consumed, often used in analyses of costs and benefits.

Perfectly Competitive

Describes a market situation where firms sell identical products, there are no barriers to entry or exit, and no single buyer or seller can influence the market price.

Excess Profits

Profits that exceed what is considered normal or expected, often due to favorable market conditions or monopoly power.

Price Takers

Firms or individuals who accept the market price as given and have no power to influence that price due to their small size in the market.