Which of the Following Is TRUE Regarding a Perfectly Competitive

question 83

Multiple Choice

Which of the following is TRUE regarding a perfectly competitive firm?

• A) The firm can charge a lower price than its competitors and thereby sell more output and increase its profits.
• B) The firm always earns a normal profit.
• C) The firm's marginal revenue continually decreases.
• D) The firm's minimum efficient scale is small relative to the market demand.

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Definitions:

Reserves

Funds or materials set aside or saved for future use or to cover unforeseen expenses; in banking, it refers to the fraction of deposits that a bank keeps in hand to ensure liquidity.

Deposits

Funds placed into an account at a financial institution for safekeeping, which can include savings accounts, checking accounts, and certificates of deposit.

Excess Reserves

Banking reserves that are held by a bank in excess of what is required by regulations or central bank requirements.

Required Reserves

The minimum amount of reserves a bank is mandated to hold by central banking authorities, often a percentage of the bank's deposit liabilities.