Figure 13-4 Suppose a Firm Operating in a Competitive Market Has the Has

question 399

Multiple Choice

Figure 13-4
Suppose a firm operating in a competitive market has the following cost curves:
-Refer to Figure 13-4.When price rises from P3 to P4,the firm finds that

• A) fixed costs decrease as output increases from Q3 to Q4.
• B) it can earn a positive profit by increasing production to Q4.
• C) profit is still maximized at a production level of Q3.
• D) average revenue exceeds marginal revenue at a production level of Q4.

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Definitions:

Strike Price

The determined price point where the possessor of a call option has the right to buy, or in a put option scenario, to sell the asset in question.

Put Option

A financial contract giving the buyer the right, not the obligation, to sell an asset at a specified price within a specified time.

Market Price

The present cost at which a good or service can be purchased or sold.

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy a stock, bond, commodity, or other assets at a specified price within a specific time frame.