When a Competitive Firm Has Reached a Level of Output

question 27

Multiple Choice

When a competitive firm has reached a level of output at which the marginal revenue product of each input is equal to the price of that input it:

• A)is producing that output at least possible cost, but is not necessarily at maximum-profit output level.
• B)is at its maximum-profit output level, but is not necessarily producing that output at least possible cost.
• C)is at maximum-profit output level and is producing that output at least possible cost.
• D)is not necessarily either at maximum-profit level of output or at least possible cost for that output.
• E)is none of the above.

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Definitions:

Maximize Utility

The economic principle aiming to achieve the highest satisfaction possible from consumption given limited resources.

Allocate Money Income

The process of distributing financial resources among different uses to satisfy various needs and desires.

Elasticity

A measure in economics that shows how the quantity demanded or supplied of a good changes in response to price or other economic factors.

Marginal Utility

The additional satisfaction or benefit (utility) that a consumer gains from consuming one more unit of a good or service.