Exhibit 10-12 -At the Profit-Maximizing (Or Loss-Minimizing) Output and Price, the Firm

question 152

Multiple Choice

Exhibit 10-12
-At the profit-maximizing (or loss-minimizing) output and price, the firm in Exhibit 10-12 would

• A) be earning zero economic profit (i.e., breaking even)
• B) be earning an economic profit
• C) be earning an economic loss
• D) be better off to shut down since total revenue does not cover fixed costs
• E) have to expand to stay in business in the long run

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Definitions:

Straight-Line Depreciation

A tactic for parceling the cost of a tangible property throughout its lifespan in steady yearly payments.

Income Taxes

Taxes imposed by a government on the financial income generated by all entities within their jurisdiction.

Cash Flow

The inflow and outflow of cash representing the operating activities of an organization.

Working Capital

The difference between a company's current assets and current liabilities, indicating operational liquidity.