If the Price That Determined Where Marginal Revenue Equaled Marginal

question 69

Multiple Choice

If the price that determined where marginal revenue equaled marginal cost were below the bottom of the average variable cost curve, then the profit-maximizing, monopolistically competitive firm would:

• A) produce an output amount where marginal cost = marginal revenue and make a small profit.
• B) produce an output amount that corresponded to the place where marginal cost = marginal revenue and break even.
• C) produce an output amount that corresponded to the place where marginal cost = marginal revenue but make a small loss.
• D) shut down because it would cost more to produce and sell output than it would to shut down and lose all fixed costs.
• E) produce an output amount that corresponded to the place where average total cost = average variable cost and incur a small loss.

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Definitions:

Physical Inventory

The manual count of all merchandise or stock in a store or warehouse at a particular time.

Estimated Returns Inventory

A reserve of products anticipated to be returned by customers, accounting for potential future merchandise returns.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts and prepare the company’s books for the next period.

Perpetual Inventory System

An approach to inventory management where updates to inventory records are made in real-time after each purchase, sale, or return transaction.