A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4.00 and the market price is $4.50. What should the firm do?
A. Shut down if the minimum possible average variable cost is below $4.50
B. Decrease output if the minimum possible average variable cost is below $4.50
C. Increase output if the minimum possible average variable cost is below $4.50
D. Decrease output if the minimum possible average variable cost is above $4.50
C. Increase output if the minimum possible average variable cost is below $4.50
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The above figure shows a labor market with minimum wage equal to $16. In this figure, what area equals the deadweight loss?
A) area A B) area B C) area C D) area D E) area E
Assume a perfectly competitive firm is producing a level of output at which MR < MC. What will happen as the firm moves to its profit-maximizing equilibrium?
A) Marginal revenue will rise. B) Marginal revenue will fall. C) Marginal cost will rise. D) Marginal cost will fall.