If a perfectly competitive firm produces an output level at which price is less than marginal costs, then the firm should:

A. reduce output to earn greater profits or smaller losses.
B. leave its output level unchanged provided it is covering its variable cost.
C. expand output to earn greater profits or smaller losses.
D. raise its price.


Answer: A

Economics

You might also like to view...

An increase in the average tax rate that ________ the budget deficit in an example of ________

A) raises, automatic stabilization B) raises, discretionary fiscal policy C) lowers, automatic stabilization D) lowers, discretionary fiscal policy

Economics

The steeper the central bank reaction function, the ________ the central bank increases the interest rate in response to the current inflation rate being above the target inflation rate and the ________ the central bank decreases the interest rate in

response to the actual inflation rate being below the target inflation rate. A) more; more B) more; less C) less; more D) less, less

Economics

The value added by a firm is defined as: a. the sum of all income earned by the workers in the firm

b. the firm's actual investment minus planned investment. c. the value of the product manufactured by the firm plus the transaction costs incurred by the firm. d. the value of the firm's product minus the cost of materials it bought from other firms. e. the increase in the value of the firm's stock or bond.

Economics

If a firm hires its fourth worker for $5 and its fifth worker for $8, then

a. the firm is a monopolist. b. the firm must be substituting capital for labor. c. the fifth worker must have been less productive than the fourth. d. the firm is not maximizing its profit. e. the labor market is not perfectly competitive.

Economics