If a Perfectly Competitive Firm's Price Increases,then

question 114

Multiple Choice

If a perfectly competitive firm's price increases,then:

• A)the marginal-cost curve will shift up.
• B)the demand curve faced by the firm will shift to the left.
• C)marginal cost will fall as output declines.
• D)the marginal-revenue curve for the firm will shift up.
• E)the marginal-cost curve for the firm will shift down.

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Definitions:

Excess Capacity

The situation where a firm is producing less than the maximum output due to lack of demand.

Profit-Maximizing Rule

A principle stating that profit maximization occurs when a firm's marginal cost equals its marginal revenue.

Perfectly Competitive

Describes a market structure where many firms sell identical products, there are no barriers to entry or exit, and all firms are price takers.

Excess Capacity

A situation where a firm is producing at a lower scale of output than it has been designed for, leading to inefficiencies.