As a general rule, profit-maximiaing producers in a competitive maket produce ouput at a point where:

A) marginal cost is increasing
B) marginal cost is decreasing
C) marginal revenue is increasing
D) price is less than marginal revenue

I was picking C for the answer?

The short-run supply curve for a firm in a perfectly compptitce marker is:

A) likely to be horizontal
B) likely to slope downward
C) determined by forces external to the firm
D) It's marginal cost curve (above average varible cost)

I was picking B for the answer?

Question 1: As a general rule, profit-maximizing producers in a competitive market produce output at a point where:

A) marginal cost is increasing
B) marginal cost is decreasing
C) marginal revenue is increasing
D) price is less than marginal revenue

The correct answer is D) price is less than marginal revenue.

To understand why, let's break it down:

1. Profit-maximizing producers aim to maximize their total profit, which is determined by the difference between total revenue and total cost.
2. Total revenue is calculated by multiplying the price (P) with the quantity (Q) of output sold, TR = P * Q.
3. Marginal revenue (MR) is the additional revenue earned by selling one more unit of output. In a competitive market, MR is equal to the price (P).
4. Marginal cost (MC) is the additional cost incurred by producing one more unit of output.
5. Producers will keep increasing their level of production until the marginal revenue is greater than or equal to the marginal cost (MR >= MC). This is because each additional unit produced adds more revenue than cost, contributing to overall profit.
6. However, if the price is less than the marginal revenue (P < MR), the producer will reduce production rather than increasing it because the additional revenue gained is less than the additional cost incurred.

So, in a competitive market, profit-maximizing producers produce output at a point where the price is less than (or equal to) the marginal revenue.

Question 2: The short-run supply curve for a firm in a perfectly competitive market is:
A) likely to be horizontal
B) likely to slope downwards
C) determined by forces external to the firm
D) It's marginal cost curve (above average variable cost)

The correct answer is A) likely to be horizontal.

To understand why, let's consider the characteristics of a perfectly competitive market:

1. In a perfectly competitive market, there are many buyers and sellers, with homogeneous products, easy entry and exit, and perfect information.
2. Individual firms in a perfectly competitive market are price-takers, meaning they have no control over the market price and must accept the prevailing price.
3. In the short run, firms can only adjust their level of production but not their fixed costs.
4. In the short run, the supply curve for an individual firm is determined by the marginal cost curve above the average variable cost (MC > AVC).
5. However, the short-run supply curve for the entire industry is determined by aggregating the individual firm's supply curves.
6. If the market price is above the average variable cost, each firm will produce at its minimum average variable cost to cover its variable costs.
7. As more firms enter the market in the short run, the industry supply will increase, resulting in a horizontal supply curve.

Therefore, in a perfectly competitive market, the short-run supply curve for an individual firm is determined by its marginal cost curve above the average variable cost, while the short-run supply curve for the entire industry is likely to be horizontal.