A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 500 units is $1.50. The average variable cost is $1.00. The market price of the product is $1.25. To maximize profits or minimize losses, the firm should
A) continue producing 500 units.
B) continue production, but produce less than 500 units.
C) increase production to more than 500 units.
D) shut down.

Question

Quizplus · Accepted Answer

The Answer of A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 500 units is $1.50. The average variable cost is $1.00. The market price of the product is $1.25. To maximize profits or minimize losses, the firm should
A) continue producing 500 units.
B) continue production, but produce less than 500 units.
C) increase production to more than 500 units.
D) shut down.

A Firm Sells a Product in a Purely Competitive Market