Figure 10-1
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Suppose a perfectly competitive firm’s situation is shown in Figure 10-1 and the firm is currently producing at B. What should the firm do in this situation?
A. The firm should continue producing at B since that is the short-run equilibrium.
B. The firm should increase production to C, so that MR = MC.
C. The firm should decrease production to lower marginal costs.
D. The firm should lower the price and continue to produce at B.
Answer: B
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