A Firm in a Competitive Market Currently Produces and Sells

question 298

Multiple Choice

A firm in a competitive market currently produces and sells 500 doorknobs for a price of $10 per doorknob. Which of the following events would decrease the firm's average revenue?

• A)The firm increases its output above 500 doorknobs.
• B)The firm decreases its output below 500 doorknobs.
• C)The market price of doorknobs rises above $10.
• D)The market price of doorknobs falls below $10.

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Definitions:

Installment Loan

is a type of loan that is repaid over time with a set number of scheduled payments, typically monthly.

Outstanding Principal

The remaining amount of money borrowed on a loan or bond that has not yet been repaid.

Equity Capital

Funds raised by a company in exchange for a share of ownership in the company.

Venture Capital

Financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.