A perfectly competitive firm's output is currently such that its marginal revenue is $5 and marginal cost is $4. Assuming profit maximization, the firm should
A. cut price and increase output.
B. raise price and decrease output.
C. leave price unchanged and decrease output.
D. leave price unchanged and increase output.
Answer: D
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If the firm hires 5 workers, the average cost equals
a. $250 b. $50 c. $5 d. Need more information
The size of the customer population interested in buying subcompact cars increases by 20 percent during a year. This example shows a change in what PYNTE factor?
a. P b. T c. N d. E
(Advanced analysis) Assume that the MPS is .33 in an economy that has an aggregate supply curve with a slope of 1. An increase in investment spending of $10 billion will shift the aggregate demand curve rightward by:
A. $30 billion and increase real GDP by $15 billion. B. $30 billion and increase real GDP by $30 billion. C. $10 billion and increase real GDP by $30 billion. D. $10 billion and increase real GDP by $10 billion.
Roaring Lion Studios can produce DVDs at a constant marginal cost of $5 per disk, and the studio has just releasing the DVD for its latest hit film, Ernest Goes to the Hamptons
The retail price of the DVD is $25, and the elasticity of demand for this film is -2. Has the studio selected the profit-maximizing retail price for this DVD? A) Yes B) No, the retail price is too low C) No, the retail price is too high D) We do not have enough information to answer this question.