If price is less than marginal cost, a perfectly competitive firm should decrease output because
A. Marginal costs are increasing.
B. Marginal revenue is decreasing.
C. The firm is producing units that cost more to produce than the firm receives in revenue, thus reducing profits (or increasing losses).
D. Total revenues are decreasing.
Answer: C
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Refer to Figure 13-8. What is the profit-maximizing output level?
A) 22 cases B) 24 cases C) 30 cases D) 38 cases
When describing the opportunity cost of two producers, economists use the term
a. natural advantage. b. trading advantage. c. comparative advantage. d. absolute advantage.
The price of leisure is the wage rate.
Answer the following statement true (T) or false (F)
A firm is currently producing in the elastic portion of its demand curve. What course of action do you recommend for it assuming it wants to raise revenue?
A. Continue selling at the same price, but increase the amount it produces. B. Increase price, because if it increases price and demand is elastic, total revenue will increase. C. Continue producing at the current output level, because it maximizes its total revenue by producing in the elastic portion of its demand curve. D. Reduce price, because if it reduces price and demand is elastic, total revenue will increase.