Why does economic theory predict that a perfectly competitive firm will produce at the point where price equals marginal cost?
a. This point provides an efficient allocation of society's resources.
b. This point results in zero economic profit.
c. This point maximizes profit for the firm.
d. This point will minimize ATC for the firm.
Ans: c. This point maximizes profit for the firm.
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Demand will be more elastic when
a. the time the consumer has to adjust to price changes is short. b. the price of the good is low. c. the number of good substitutes is large. d. the consumption of the good is essential.
If the economy is experiencing less than full-employment, the Keynesian model recommends that the government
a. do nothing to stimulate the economy. b. undertake expansionary fiscal policy to stimulate aggregate demand. c. undertake expansionary fiscal policy to stimulate aggregate supply. d. balance the budget to stimulate aggregate demand.