Suppose a Risk-Neutral Competitive Firm Must Set Output Before It

question 94

Multiple Choice

Suppose a risk-neutral competitive firm must set output before it knows for sure the market price.Suppose the market price is given by p = p* + e,where p* is the mean price and e is a random term with an expected value of zero.Then in order to maximize expected profits,the firm should produce where:

• A) p = MC.
• B) p* = MC.
• C) p* + e = MC.
• D) p > MC.

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Definitions:

Autonomic Nervous System

The component of the nervous system responsible for controlling automatic bodily processes, such as the regulation of heart rate, digestion, and breathing rate.

Sympathetic Division

A component of the autonomic nervous system responsible for initiating the response commonly known as fight or flight.

Emergency

A situation that poses an immediate risk to health, life, property, or environment, requiring urgent intervention to prevent a worsening of the situation.

Peripheral Nervous

refers to the part of the nervous system that lies outside the central nervous system, comprising nerves and ganglia, responsible for relaying information to and from the body and brain.