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# Suppose price declined from \$131 to \$100. This firm’s:

 ▲ 0 ▼ ♥ 0 Suppose price declined from \$131 to \$100. This firm’s: a. marginal-cost curve would shift downward. b. economic profit would fall to zero. c. profit-maximizing output would decline. d. total cost would fall by more than its total revenue
Answer and explanations Here is the full solution including the answer and explanation.

Explanation
c is correct
In a purely competitive market, marginal revenue is equal to price. Therefore, if the price falls from \$130 to \$100, then the output produced of the commodity would fall rapidly. Thus, the profit maximization condition would not be fulfilled and the profitability of the firm would decrease.

a is incorrect
In a purely competitive market, the price is equal to marginal revenue. Therefore, price is constant so it would not decrease however the additional cost would decline instead of shifting downwards.

b is incorrect
In a competitive market, price is marginal cost and marginal cost is equal to marginal revenue for profit maximization. If the price decreases from \$130 to \$100 economic profit would not be zero but it will decrease by certain units.

d is incorrect
The price is constant in a purely competitive market so it means that price is equal to marginal revenue. Total cost would not fall much from total revenue as it ensures that profit will be maximized but when the price falls from \$130 to \$100 the profitability actually falls.