If a Competitive Firm Is Operating in Short Run Equilibrium

question 86

Multiple Choice

If a competitive firm is operating in short run equilibrium and then its fixed costs fall by 40 percent,it should:

• A) use more labor and less capital in current production.
• B) not change its output.
• C) increase its output.
• D) decrease its output.

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Definitions:

Demand

the quantity of a good or service that consumers are willing and able to purchase at different prices at a given time.

Part Satisfied

Partial fulfillment of a requirement, order, or need, where the entire demand is not completely met.

Retail Price

The price at which a product is sold to the end consumer by a retailer.

Optimal Order

The most efficient quantity of goods to order, balancing order costs with holding costs to minimize total inventory costs.