Refer to Figure 23.5 for a perfectly competitive firm.Which of the following is not true for this firm at a price of $200?
A) The firm is using the fewest resources possible to produce each unit of output.
B) The firm is practicing marginal cost pricing.
C) The price is a reflection of the highest-valued good that could have been produced with the resources the firm used for the last unit it produced.
D) The firm should leave this market in an effort to earn economic profits.

Question

Refer to Figure 23.5 for a perfectly competitive firm.Which of the following is not true for this firm at a price of $200?
A) The firm is using the fewest resources possible to produce each unit of output. 
B) The firm is practicing marginal cost pricing. 
C) The price is a reflection of the highest-valued good that could have been produced with the resources the firm used for the last unit it produced. 
D) The firm should leave this market in an effort to earn economic profits.

Quizplus · Accepted Answer

At a price of $200, the firm is producing where its marginal cost equals price, indicating that it is practicing marginal cost pricing. The price reflects the highest-valued good that could have been produced with the resources used for the last unit produced. The firm is not using more resources than necessary to produce each unit of output, indicating that it is using the fewest resources possible. However, the firm may still be earning economic profits at this price, so it should not leave the market. Therefore, the statement in option D is not true.