A Perfectly Competitive Firm in a Constant-Cost Industry Produces 1,000

question 218

Multiple Choice

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run, what happens to output level in the long run?

• A)The firm's output falls.
• B)The firm's output increases.
• C)The firm produces the same output level.
• D)There is insufficient information to answer the question.

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Definitions:

CCA Rate

Refers to Capital Cost Allowance rate, which is the rate at which a business can claim tax depreciation on certain properties or equipment in Canada.

CCA Class

Canadian Capital Cost Allowance Class; a categorization in Canadian tax law that determines the depreciation rate for tax purposes on different types of assets.

Required Rate

The lowest expected gain an investor aims to receive from an investment in a specific asset, taking into account the associated risk.

Fixed Costs

Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance premiums.