A Firm Sells a Product in a Purely Competitive Market

question 162

Multiple Choice

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4.00 and the market price is $4.50. What should the firm do?

• A) shut down if the minimum possible average variable cost is below $4.50
• B) decrease output if the minimum possible average variable cost is below $4.50
• C) increase output if the minimum possible average variable cost is below $4.50
• D) decrease output if the minimum possible average variable cost is above $4.50

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Definitions:

Level of Significance

The likelihood of incorrectly dismissing the null hypothesis during a statistical analysis despite it being correct.

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Classification based on body mass index (BMI), where individuals with a BMI over a certain threshold are regarded as overweight.

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Individuals enrolled in an institution of higher education pursuing undergraduate or postgraduate degrees.

Proportion Increased

A measure indicating how much the ratio of a part to the whole has grown.