Use the following graph to answer the next question.
Given the graph above, which level of output should the perfectly competitive firm choose?
A. X2, since at this level of output the difference between MR and MC is maximized
B. X3, since any increase in output beyond that point will reduce profits
C. X1, since a lower level of output will reduce profits
D. either X1 or X3, since profits will be the same
Answer: B
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The short run is best defined as:
A. a period of time sufficiently short that at least one factor of production is fixed. B. one year or less. C. the period of time between quarterly accounting reports. D. a period of time sufficiently short that all factors of production are variable.
Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
Refer to Scenario 10.7. Suppose that the firm chooses to produce 200 ink pads. At this level of output the demand for ink pads is
A) inelastic. B) unit elastic. C) elastic. D) unit elastic.
Which of the following is TRUE?
a. Purchase a supplier as long as the supplier is profitable b. Purchasing a profitable customer would lead to an increase in profits c. Purchasing a profitable supplier may not necessarily increase your profits d. Purchasing a profitable supplier is a bad idea and would lead to decreased profits