If a Perfectly Competitive Wheat Farmer Is Maximizing Its Profit

question 138

Multiple Choice

If a perfectly competitive wheat farmer is maximizing its profit and then increases its output,the farmer's

• A) total revenue increases, but total cost rises by more so that the farmer's total profit decreases.
• B) total revenue decreases and total cost increases, both thereby decreasing the farmer's total profit.
• C) total revenue does not change but total cost increases, thereby decreasing the farmer's total profit.
• D) marginal revenue increases, but so does marginal cost, so that the farmer's total profit increases.
• E) total revenue and total cost both rise, but the effect on the farmer's total profit is uncertain.

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Definitions:

Capacity Costs

Expenses related to the maximum level of production or service capacity that a business can achieve, including costs for maintaining and operating production facilities.

Variable Overhead Spending Variance

The difference between the actual variable overhead costs incurred and the expected costs allotted for the actual level of activity.

Unfavourable

Describes an outcome or condition that is not beneficial or desired, often used in financial contexts to indicate underperformance.

Favourable

A term usually used in finance and accounting to refer to variances or differences that are beneficial to a company's financial health.