At what point does a profit-maximizing firm in perfect competition produce ?
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Answer: C. Marginal revenue equals marginal cost
Explanation
Profit maximization in perfect competition occurs where marginal revenue equals marginal cost. Producing where marginal revenue exceeds marginal cost increases total business profit. Firms stop expanding output once additional units cost more than revenue generated. Perfect competition features price-taking firms facing horizontal demand curves. Marginal revenue in competitive markets equals the prevailing market price. Calculus optimization confirms profit peaks where the derivative of profit equals zero.
Agricultural farmers determine crop harvest quantities using marginal cost principles. Competitive firms adjust production levels rapidly in response to market price shifts. Understanding profit maximization helps businesses survive intense industry competition. Total revenue maximization occurs where marginal revenue equals zero, not profit max. Marginal revenue equaling zero maximizes total revenue rather than total profit. Equaling average cost determines zero economic profit points rather than maximization.
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Answer: B. a free rider
A free rider consumes public goods without paying mandatory fees or taxes. BBC television broadcasts are funded by license fees paid by compliant viewers. Free riders enjoy public broadcast access while avoiding their fi...
Q2. When does a positive externality take place ?
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Answer: A. The social marginal costs are higher than the private marginals costs
A positive externality occurs when social marginal benefits exceed private marginal benefits because of spillover benefits to third parties.
Q3. What is a characteristic of a public good ?
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Answer: C. Not be provided in the free market
Because of the free-rider problem, public goods tend to be heavily underprovided or completely absent in purely private, unregulated free markets.
Q4. Lower interest rates expand the monetary base, leading to an _________ in consumer credit accessibility alongside a ________ in borrowing costs?
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Answer: C. increase, reduction
Expansionary monetary policy lowers benchmark interest rates across the banking system. Lower rates reduce borrowing costs for businesses and individual consumers alike. Commercial banks expand credit availability as the...
Q5. What is an agreement that fixes prices and quantities called?
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Answer: C. collusion
Collusion occurs when competing firms illegally cooperate to fix prices, restrict output, or divide markets. By acting together, oligopolistic firms mimic monopoly behavior to maximize their joint profits at consumer exp...
Q6. A profit-maximizing business will continue hiring workers until _____ matches the _______?
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Answer: D. marginal cost of labor, marginal revenue product
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