If a Perfectly Competitive Firm Raised the Price of Its

question 242

Multiple Choice

If a perfectly competitive firm raised the price of its product,

• A) its profits would increase.
• B) the quantity of output it sells decreases to zero.
• C) rival firms will follow suit and raise their prices also.
• D) the firm will be forced to advertise more.
• E) its total revenue would rise but its total cost would rise by more.

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Definitions:

Common Stock

Equity ownership in a corporation, providing voting rights and a share in the company's profits through dividends.

Stock Split

A corporate action that increases the number of a company’s outstanding shares by dividing each share, which in turn reduces the price per share.

Par Value

The face value of a bond or the stock value stated in the corporate charter, which is the legal capital per share.

Market Value

The current quoted price at which an asset or service can be bought or sold in an open market.