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 earning positive economic profits (the market price is above the average total cost). Therefore, the firm should stay in the market and continue to earn profits. It would not make sense for the firm to leave the market in this situation.