A perfectly competitive firm faces a market clearing price of $150 per unit. Average variable costs are at the minimum value of $200 per unit at an output rate of 100 units. Marginal cost equals $150 per unit at an output rate of 75 units. It can be concluded that the short-run profit-maximizing output rate is
A. 75 units, at which the firm earns $50 in economic profits per unit sold.
B. 75 units, at which the firm earns zero economic profits per unit sold.
C. 0 units, because price is less than average variable costs.
D. 100 units, because marginal cost equals average variable costs.
Answer: C
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a. normal; elastic
b. normal; inelastic
c. normal; unit elastic
d. inferior; elastic
e. inferior; inelastic
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