The Ajax Manufacturing Company Is Selling in a Purely Competitive

question 106

Multiple Choice

The Ajax Manufacturing Company is selling in a purely competitive market. Its output is 100 units, which sell at $4 each. At this level of output, total cost is $600, total fixed cost is $100, and marginal cost is $4. The firm should

• A) reduce output to about 80 units.
• B) expand its production.
• C) continue to produce 100 units.
• D) produce zero units of output.

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Definitions:

Cyclical Industry

An industry highly sensitive to the economic cycle, experiencing rapid growth in booming economies and significant declines during recessions.

Automobile Industry

The automobile industry encompasses the wide range of companies and activities involved in the design, manufacturing, marketing, and selling of motor vehicles.

Tobacco Industry

Comprises companies and entities that manufacture, market, and distribute tobacco and tobacco-related products.

Federal Reserve

The central banking system of the United States, responsible for setting monetary policy, regulating banks, maintaining financial stability, and providing banking services.