Given the graph above, which level of output should the perfectly competitive firm choose?
1. either X_1 or X_3 since profits will be the same
2. X_3, since any increase in output beyond that point will reduce profits
3. X_1, since a lower level of output will reduce profits
4. X_2, since at this level of output the difference between MR and MC is maximized
Given the graph above, which level of output should the perfectly competitive firm choose?
1. either X_1 or X_3 since profits will be the same
2. X_3, since any increase in output beyond that point will reduce profits
3. X_1, since a lower level of output will reduce profits
4. X_2, since at this level of output the difference between MR and MC is maximized
Related textbook solutions
Related questions
QUESTION 22
For a perfectly competitive firm, profit maximization (or loss minimization) occurs at the level of output at which
| a. |
MR = MC. |
|
| b. |
MR = AVC. |
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| c. |
P = ATC. |
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| d. |
MR = ATC. |
4 points
QUESTION 23
If MR > MC, then
| a. |
profits are being maximized. |
|
| b. |
the firm is producing too much of the good to be maximizing profits. |
|
| c. |
the firm can increase its profits (or minimize its losses) by increasing output. |
|
| d. |
the firm must be incurring losses. |
4 points
QUESTION 24
If firms are earning zero economic profits, they must be producing at an output level at which
| a. |
price minus marginal cost. |
|
| b. |
total revenue equals total costs, in other words, normal profits. |
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| c. |
price equals average variable cost. |
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| d. |
marginal revenue equals marginal cost. |
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| e. |
none of the above |
4 points
QUESTION 25
In the theory of perfect competition,
| a. |
the market demand curve is horizontal. |
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| b. |
the single firm faces a horizontal demand curve. |
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| c. |
the single firm faces a downward-sloping demand curve. |
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| d. |
the market demand curve is downward sloping. |
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| e. |
b and d |
