Martha's Cleaning Services is a perfectly competitive firm that currently cleans 30 offices a week and charges $20 per office, which is the going market price. Martha's marginal cost is $15
What should Martha do to increase her economic profit? Clean more offices? Raise her price? Explain your answer.
Martha should increase the number of offices she cleans until her marginal cost equals the market price. This way she will maximize her profit. As a perfectly competitive firm, Martha is a price taker and cannot raise or lower her price without losing profit.
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Classical economists think that lump-sum tax changes
A) should be used to smooth business cycles. B) have a powerful effect on the economy. C) affect aggregate demand after a lag. D) have no effect because of Ricardian equivalence.
Which of the following models results in the greatest deadweight loss, assuming a fixed number of firms with identical costs and a given demand curve?
A) Cournot B) Stackelberg C) Monopoly D) Perfect competition
Historically, Keynesian economists have argued that government spending will stimulate aggregate demand more than tax cuts because
a. government spending will stimulate aggregate demand more quickly than a tax cut. b. there are fewer adverse side effects to an increase in government spending. c. all of the spending will add to aggregate demand, but a portion of the tax cut will be saved. d. an increase in government spending can quickly be reversed once the economy has recovered.
The way in which a country benefits from trade is that it can
A. obtain goods at lower opportunity cost than producing them itself. B. exploit economies of scale in production and lower the cost of goods it produces. C. obtain a wider range of goods than it can produce for itself. D. All of the above are benefits.