If a Competitive Firm Continues to Produce When Marginal Revenue

question 11

Multiple Choice

If a competitive firm continues to produce when marginal revenue is less than marginal cost, then each additional unit of output

• A)maximizes profits or minimizes losses.
• B)minimizes losses.
• C)reduces total profit.
• D)increases total profit.
• E)increases both total costs and total revenue.

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Definitions:

Salvage Value

The evaluated resale price of an asset after its lifespan of usefulness.

Straight-Line Method

A depreciation technique where an asset loses an equal amount of value each year over its useful life.

Payback Period

The duration needed to recoup the expenses of an investment.

Simple Rate of Return

A financial metric used to evaluate the efficiency of an investment or to compare the efficiencies of several investments, calculating net annual profit divided by initial investment cost.