A Perfectly Competitive Firm Is Producing at the Quantity Where

question 109

Multiple Choice

A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4.The price of the good is $5.To maximize its profit,this firm should

• A) raise its price.
• B) lower its price.
• C) increase its output.
• D) decrease its output.
• E) increase the price it charges for its product.

---

Definitions:

Processing Costs

Expenses associated with the process of transforming raw materials into finished goods, often used in industries where products undergo many stages of production.

Sales and Direct Cost

The total revenue generated from goods and services minus the direct costs associated with producing those goods and services.

Activity-Based Costing

A method of costing that identifies the relationship between costs, activities, and products, and through this relationship, assigns indirect costs to products less arbitrarily than traditional methods.

Processing Costs

The expenses involved in handling, treating, or converting raw materials into finished products.