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    Decsion making with respect to Market price

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    Refer to the attachment for a perfectly competitive firm. If the market price is $23:

    a) the firm should produce 40 units

    b) the firm will have above normal profits

    c) economic profits are greater than zero

    d) all of the above

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    Solution Preview

    If the market price is $23:

    d) all of the above

    This is because the Firm's output is 40 units at$23. Also it will have economic profits greater than zero because Market price is more than the Average total cost. Thus it will have above normal ...

    Solution Summary

    This explains the critieria of determining the market price under perfect competition.