A firm sells a product in a perfectly competitive market. The marginal cost of the product at the current output level of 200 units is $4. The minimum possible average variable cost is $3.50. The market price of the product is $3. To maximize profits or minimize losses, the firm should
A. shut down.
B. continue producing 200 units.
C. increase production to more than 200 units.
D. decrease production to less than 200 units.
Answer: A
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Which of the following will be included as a unilateral transfer in the balance of payments account of a country?
a. Transportation costs involved in traveling from a foreign country to the domestic country b. A foreign worker in the domestic country sending money to his home country c. Compensation earned by foreign workers in the domestic country d. Royalties paid to residents working in a foreign country e. Income paid on foreign-owned investments in the domestic country
Which of the following provides an example of an externality? a. The air pollution generated when you drive your car
b. The view that passersby and neighbors enjoy when observing your rose garden. c. The free concerts neighbors hear when an accomplished musician practices at home. d. All of the above.
Talking loudly in a library creates
a. a market for noise b. a positive externality c. a side payment d. a public good e. a negative externality
During normal times, the multiplier effect of an increase in government spending financed by taxes will be
a. strengthened, if the additional spending flows into sectors of the economy where the unemployment rates are low. b. weakened by an offsetting reduction in spending due to the higher taxes. c. unaffected, as long as the higher taxes are in the future. d. strengthened, if corporate tax rates are increased and personal tax rates remain unchanged.