Question
A firm purchase an input(factor of production) in a competitive factor market at a price $27 per unit. At the current level of use, the
A firm purchase an input(factor of production) in a competitive factor market at a price $27 per unit. At the current level of use, the factor's marginal product is 3. The firm sells its output in a competitive market at a price of $20 per unit. From this information, assuming the firm wants to maximize its profit, we can conclude that the firm
A. should decrease production of its product.
B. is currently at the profit-maximizing point.
C. should increase production of its product.
D. should decrease the price of its product.
***Please explain the reason of the answer***
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started