A Competitive Firm Has Been Selling Its Output for $20

question 367

Multiple Choice

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price rises to $25, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its

• A)quantity of output is higher than it was previously.
• B)average total cost is higher than it was previously.
• C)marginal revenue is higher than it was previously.
• D)All of the above are correct.

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Definitions:

Successive Approximations

A method in behavioral psychology where rewards are given for behaviors that increasingly resemble the target behavior.

Shaping

Rewarding successive approximations of a desired behavior.

Rewarding

Providing a positive reinforcement following desirable behavior, thereby increasing the likelihood of the behavior's recurrence.

Operant Conditioning

A method of learning that occurs through rewards and punishments for behavior, encouraging the association between actions and consequences.