Asked by Percy Mitchell on May 18, 2024
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An industry analyst observes that in response to a small increase in price, a competitive firm's output sometimes rises a little and sometimes a lot. The best explanation for this finding is that:
A) the firm's marginal cost curve is random.
B) the firm's marginal cost curve has a very small positive slope.
C) the firm's marginal cost has a very large positive slope.
D) the firm's marginal cost curve is horizontal for some ranges of output and rises in steps.
E) the firm's marginal cost curve is downward sloping.
Marginal Cost Curve
A curve that graphically represents the cost of producing one additional unit of a good, typically illustrating how marginal cost varies with the quantity produced.
Competitive Firm
A company operating in a market where it has to set its prices based on the market conditions because it has little to no influence over the market prices.
Output Rises
An increase in the amount of goods or services produced by a company or economy.
- Grasp the concept of marginal cost and its importance in a firm’s production and supply decisions.
Verified Answer
Learning Objectives
- Grasp the concept of marginal cost and its importance in a firm’s production and supply decisions.
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