If a perfectly competitive firm is producing at its profit-maximizing output in the short run and fixed costs decline,the firm should
A)Use less capital but increase output by hiring more labor.
B)Not change output.
C)Reduce output.
D)Increase output.

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive firm determines its profit-maximizing output level based on marginal costs and marginal revenue, independent of fixed costs. A decline in fixed costs does not affect the marginal cost of production or the market price, so the firm's profit-maximizing output remains unchanged.

If a Perfectly Competitive Firm Is Producing at Its Profit-Maximizing