What does a perfectly competitive firm do to maximize profits?
What will be an ideal response?
The perfect competitor cannot influence market price, so it must find the rate of production that maximizes its profits. The profit-maximizing output is the output at which marginal revenue equals marginal cost. If marginal revenue is greater than marginal cost, an additional unit increases revenues more than costs, so profits increase. If marginal revenue is less than marginal cost, a reduction in output of one unit reduces costs more than revenues, so profits increase. Economic profits are maximized when marginal revenue equals marginal cost.
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Which of the following statements is true of the demand curve and the marginal revenue curve of a monopolist?
A) Both curves have the same intercept on the price axis. B) The demand curve is downward sloping while the marginal revenue curve is upward sloping. C) The intercept of the demand curve on the price axis is higher than the intercept of the marginal revenue curve. D) The intercept of the demand curve on the price axis is lower than the intercept of the marginal revenue curve.
According to the efficient markets hypothesis, the current price of a financial security
A) is the discounted net present value of future interest payments. B) is determined by the lowest successful bidder. C) fully reflects all available relevant information. D) is a result of none of the above.