Assume a Perfectly Competitive Firm Sells Its Output for $150

question 68

Multiple Choice

Assume a perfectly competitive firm sells its output for $150 per unit.At its current 2,000 units of output,marginal cost is $140 and increasing,and average variable cost is $143.Assuming it wants to maximize its profits,it should:

• A) increase output.
• B) decrease output, but not shut down.
• C) maintain its current output rate.
• D) shut down.

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Definitions:

Working Capital

A financial metric representing the difference between a company's current assets and its current liabilities, indicating the short-term financial health and operational efficiency.

Net Operating Income

A financial metric that calculates a company's profit after operating expenses are subtracted from operating revenues.

Required Rate

This is the minimum expected rate of return on an investment, dictating the least acceptable compensation for investing capital.

Salvage Value

A prediction of what an asset will be worth on the market at the close of its effective life.