If a perfectly competitive firm produces an output level at which price is less than marginal costs, then the firm should:
A. expand output to earn greater profits or smaller losses.
B. reduce output to earn greater profits or smaller losses.
C. leave its output level unchanged provided it is covering its variable cost.
D. raise its price.
Answer: B
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The rate of output at which the price level has no tendency to rise or fall is called the
A) natural rate of output. B) potential level of income. C) bliss point. D) efficient level of output.
Consider the Keynesian consumption function. If disposable income is greater than the break-even level of disposable income, then households will be:
a. investing. b. borrowing. c. dissaving. d. saving.
Which of the following is included in the investment category under the expenditure approach to GDP accounting?
a. stocks b. bonds c. durable goods d. additions to business inventories
If real output in an economy is 1,000 goods per year, the money supply is $300, and each dollar is spent an average of 4 times per year, then according to the quantity equation, the average price level is
a. 3.33. b. 0.83. c. 1.20. d. 13.33.