Assume a Perfectly Competitive Firm Sells Its Output for $150

question 1

Multiple Choice

Assume a perfectly competitive firm sells its output for $150 per unit.At its current 2,000 units of output, marginal cost is $140 and increasing, and average variable cost is $143.Assuming it wants to maximize its profits, it should:

• A)increase output.
• B)decrease output, but not shut down.
• C)maintain its current output rate.
• D)shut down.
• E)There is not enough information to determine what the firm should do.

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Definitions:

White Knight

A corporation or individual that acquires a corporation on the verge of being taken over by forces deemed undesirable by the company's board or management.

Hostile Takeover

An acquisition attempt by a company or investor to acquire another company against the wishes of the target company's management and board of directors.

Joint Venture

Typically, an agreement between firms to create a separate, co-owned entity established to pursue a joint goal.

Existing Firms

Companies or enterprises that have been established and are currently operative in the marketplace.