In the Short Run, a Perfectly Competitive Profit Maximizing Firm

question 123

Multiple Choice

In the short run, a perfectly competitive profit maximizing firm that has not shut down:

• A) is operating on the downward-sloping portion of its AVC curve.
• B) is operating at the minimum of its AVC curve.
• C) is operating on the upward-sloping portion of its AVC curve.
• D) is not operating on its AVC curve.
• E) can be at any point on its AVC curve.

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Definitions:

Unit Sales

The total quantity of an item or product sold in a particular period.

Contribution Margin Ratio

The percentage of each sales dollar that remains after variable costs have been deducted, contributing towards covering fixed costs and generating profit.

Net Operating Income

The total profit of a company after operating expenses are subtracted from gross profit but before income taxes and interest are deducted.

Fixed Monthly Expenses

Regularly occurring costs that remain the same each month, such as rent or salaries.