A Firm Will Choose to Operate Rather Than Shut Down

question 105

Multiple Choice

A firm will choose to operate rather than shut down as long as

• A) price is greater than or equal to AFC.
• B) AFC is greater than AVC.
• C) price is greater than or equal to AVC.
• D) AVC is greater than MC.

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Definitions:

Book Value

The value of an asset as recorded on the balance sheet, calculated by subtracting any associated depreciation or amortization from its original cost.

Straight-line Method

A depreciation method that allocates an equal amount of the asset's cost to each year of its useful life.

Annual Rate

The rate of interest or growth a financial asset or liability would achieve over a period of one year.

Units-of-production

A depreciation method that allocates the cost of an asset over its useful life based on the number of units it produces, reflecting usage rather than the passage of time.