If You Were the Owner of a Price-Taker Firm Operating

question 53

Multiple Choice

If you were the owner of a price-taker firm operating at an output level where the marginal cost of producing another unit was $5, and the market price was $7, then you

• A) could increase your profit by expanding output.
• B) could increase your profit by decreasing output.
• C) are maximizing your profit at your current output level.
• D) will be able to earn positive economic profits in the long run.

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Definitions:

E(XY)

The expected value of the product of two random variables, X and Y, representing a measure of their joint variability.

Probability Distribution

A mathematical description of a random phenomenon in terms of the probabilities of its outcomes.

Bivariate Distribution

A statistical distribution describing two variables and the probabilistic relationships between them.

Independent

Two variables are independent if the occurrence or change in one variable does not affect the occurrence or change in the second variable.