Assume That a Firm Is Producing at Its Profit-Maximizing Level

question 20

Multiple Choice

Assume that a firm is producing at its profit-maximizing level of output. A decrease in fixed cost implies that:

• A) marginal revenue will increase but marginal cost will decrease.
• B) marginal revenue will not change but marginal cost will decrease.
• C) neither average total cost nor marginal cost will change.
• D) neither marginal revenue nor marginal cost will change.
• E) both marginal revenue and marginal cost will decrease.

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Definitions:

Journal Entries

The method by which financial transactions are recorded in a company's accounting records, detailing debits and credits to specific accounts.

Voucher

A record that acts as proof of a transaction and permits a payment to be made.

Gross Method

An accounting method for recording purchases at the full invoice price without deducting any cash discounts offered.

Net Method

An accounting technique that records purchases after discounts, where the purchase price is reduced by the expected discount amount.