Suppose the Christmas trees market is perfectly competitive. An owner is currently earning a profit of $1,000, the cost of producing and selling an additional Christmas tree is $25, the current market price is $20. The owner
A) should sell more trees.
B) should not sell more trees.
C) should advertise in the market to promote his sales.
D) is not maximizing his profits.
B
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How can the average-fixed-cost curve be declining when fixed cost is constant?
Sticky wages cause the:
A. short-run aggregate supply curve to slope upward. B. long-run aggregate supply curve to slope upward. C. short-run aggregate supply curve to slope downward. D. long-run aggregate supply curve to slope downward.
If the government wants to encourage the consumption of a particular good, they should enact:
A. a subsidy to buyers, since they deserve the benefit more than the producers. B. a subsidy on either buyers or sellers, since they will both have the same effect on the market. C. a subsidy to buyers, since they want to affect consumption of the good. D. a subsidy to sellers, since they want more to be produced and offered for sale.
Answer the following questions true (T) or false (F)
1. Monopolistic competition differs from oligopoly in that in monopolistic competition firms act independently while in oligopoly firms act interdependently. 2. An entry barrier exists when firms in an industry charge the lowest price possible for their products. 3. If economies of scale are significant, the typical firm will not reach the minimum point on its long-run average cost curve until it has produced a large fraction of industry sales.