Refer to Figure 13-5. The candy store represented in the diagram is currently selling Qa units of candy at a price of Pa. Is this candy store maximizing its profit and if it is not, what would you recommend to the firm?
A) Yes, it is maximizing its profit by charging the highest price possible.
B) No, it is not; it should lower its price to Pc and sell Qc units.
C) No, it is not; it should lower its price to Pb and sell Qb units.
D) No, it is not; since its marginal cost is constant, it should produce and sell as much candy as it can. It should sell Qd units at a price of Pd.
C
You might also like to view...
Allegiant Air holds a natural monopoly on most of the routes it serves in the United States. Allegiant Air ________ operate on the ________ portion of its demand curve when total revenue is ________
A) will always; elastic; increasing B) will usually; elastic; decreasing C) will never; elastic; increasing D) will always; inelastic; increasing E) will never; inelastic; increasing
If information is asymmetric, explain why the hire contract is not efficient in production and a moral hazard exists, but the fixed fee to the principal contract is efficient and does not pose a moral hazard problem
What will be an ideal response?