Suppose a Perfectly Competitive Firm Faces the Following Short-Run Cost

question 295

Multiple Choice

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $12; AVC = $10; MC = $15; MR = $16. The firm should

• A) increase output.
• B) decrease output.
• C) increase price.
• D) change nothing.

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Definitions:

Price Mechanism

The system by which the forces of supply and demand determine the prices of goods and services.

Usury Laws

Regulations governing the maximum interest rates that can be charged on loans, intended to protect consumers from excessively high rates.

Usury Law

Legislation that sets the maximum interest rates that can be charged on loans, intended to protect consumers from excessively high rates.

Quantity of Money

The total amount of money (currency, coins, and checking deposits) in circulation within an economy.