If a Firm in a Purely Competitive Industry Is Confronted

question 108

Multiple Choice

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue

• A) may be either greater or less than $5.
• B) will also be $5.
• C) will be less than $5.
• D) will be greater than $5.

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Definitions:

External Cost

Costs that are not borne by the individuals or entities responsible for producing or consuming a good or service, often affecting third parties.

Marginal Cost

The increase in total production costs resulting from the production of one additional unit of a product or service.

Artificially Scarce Good

A product or service that is made scarce through artificial means such as monopoly control or government regulations, rather than limited by natural resources.

Externalities

Costs or benefits arising from an economic activity that affect third parties who did not choose to incur that cost or benefit.