Price in a competitive market is $6; the firms’ marginal cost is $4; What would you...

Question

Question

Price in a competitive market is $6; the firms’ marginal cost is $4; What would you advise the firm to do?

Lower its price

Decrease its output

Raise its price

Increase its output

Answer 1

Answer #1

Answer

The firm produces at MC=P

as the MC is upward sloping and the P is constant as the firm is price taker so the firm should increase output up to the MC=P=$6

Option 4

increase its output

Answer 2

Similar Homework Help Questions

An increase in marginal cost causes a profit-maximizing, monopolistically competitive firm to raise price and...

An increase in marginal cost causes a profit-maximizing, monopolistically competitive firm to raise price and raise output. lower price and lower output. keep price and output the same. raise price and decrease output. lower price and increase output.
In a market served by a monopoly, the marginal cost is $60 and the price is...

In a market served by a monopoly, the marginal cost is $60 and the price is $110. In a perfectly competitive market, the marginal cost is $60. If the marginal cost increased from $60 to $75, the monopoly would raise its price _____, and the price in the perfectly competitive market would _____. by less than $15; increase to $75 Can you explain why this is the correct answer? Why the firms behave differently?
1. In a perfectly competitive market, what is the effect of an increase in marginal cost...

1. In a perfectly competitive market, what is the effect of an increase in marginal cost on equilibrium price and quantity? Under what conditions does the increase in equilibrium price equal the increase in marginal cost? 2. If equilibrium price increases by less than an increase in marginal cost, what is the response by a competitive firm in setting its output?

If the competitive firm suddenly notices that price exceeds its marginal cost, it should: Select one:...

If the competitive firm suddenly notices that price exceeds its marginal cost, it should: Select one: a. shut down. b. decrease output. c. raise its price. d. increase output.
If a perfectly competitive firm's marginal revenue was less than its marginal cost, u it would...

If a perfectly competitive firm's marginal revenue was less than its marginal cost, u it would raise its price in order to increase its profits. it would decrease output. U it must be currently earning economic losses. both (a) and (c) are true.
To maximize profits in a competitive market set price equal to marginal cost. But in a...

To maximize profits in a competitive market set price equal to marginal cost. But in a monopoly, you set marginal revenue equal to marginal cost. Based on the given information, answer the following questions. Total Revenue = 100Q – 10Q² Marginal Revenue = 100 – 20Q Total Cost = 20 + 10Q Marginal Cost = 10 Note: Competitive Market: To maximize profits set Price = Marginal Cost Monopoly Market: To maximize profits set Marginal Revenue = Marginal Cost What...

QUESTION 6 Industry is a perfectly competitive industry. Assume that as a result of changes in...

QUESTION 6 Industry is a perfectly competitive industry. Assume that as a result of changes in other markets there is a twenty percent increase in the price of variable inputs used by firms in industry Y. After all adjustments have taken place, we would expect the equilibrium price in industry Yto: increase and the number of firms to increase. decrease and the number of firms to increase. increase and the number of firms to decrease. decrease and the number of...
If a perfectly competitive firm is producing where price is equal to $20, marginal cost is...

If a perfectly competitive firm is producing where price is equal to $20, marginal cost is equal to $25, and average variable cost is equal to $15, what should the firm do, if anything, to maximize its profit? O A. increase output O B. shut down O C. decrease output (but not shut down) OD. The firm is already maximizing profit.
Assume the price in the competitive market is $10, the average total cost is $8 and...

Assume the price in the competitive market is $10, the average total cost is $8 and the marginal cost is $12 should the firm increase, or decrease or hold output?

19. To maximize profits in a competitive market set price equal to marginal cost. But in...

19. To maximize profits in a competitive market set price equal to marginal cost. But in a monopoly, you set marginal eue equal to marginal cost. Based on the given information, answer the following questions. Total Revenue- 100Q-10Q Marginal Revenue = 100-20Q Total Cost 20+10Q Marginal Cost -10 Note: Competitive Market: To maximize profits set Price Marginal Cost Monopoly Market. To maximize profits set Marginal Revenue Marginal Cost a. What price do you charge if you are in a competitive...