A Firm Sells a Product in a Purely Competitive Market

question 1

Multiple Choice

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 200 units is $4.00. The average variable cost is $3.50. The market price of the product is $3.00. To maximize profits or minimize losses, the firm should

• A) continue to produce 200 units.
• B) continue production, but produce less than 200 units.
• C) increase production to more than 200 units.
• D) shut down.

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Definitions:

Peek-a-Boo

A classic game played with babies and young children where one hides their face, then reveals it saying "Peek-a-boo," meant to entertain and teach object permanence.

Dishabituation

The process by which a previously habituated response is restored because of the presentation of a new stimulus.

Novel Stimulus

A new or unfamiliar stimulus that requires an individual to process and potentially adapt to it, often used in psychological studies to measure response or attentiveness.

Consequent

In logic, the latter part of a conditional statement, the outcome or result that follows the condition specified in its antecedent.