Assume a Perfectly Competitive Firm Sells Its Output for $150

question 69

Multiple Choice

Assume a perfectly competitive firm sells its output for $150 per unit.It currently produces 6,000 units of output,at which output level it minimizes its average variable cost at $152 per unit.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:

Interest Rate

The percentage of a loan that incurs interest costs for the borrower, often stated as an annual rate of the outstanding loan amount.

Net Present Value

A calculation that compares the value of all future cash flows of a project, discounted back to the present, to the initial investment.

Discount Rate

In finance, it's the interest rate the Federal Reserve charges banks for borrowing funds, used to control money supply.

Net Present Value

A method used in finance to assess the profitability of an investment by calculating the present value of its expected future cash flows minus the initial investment cost.