You Are Hired as an Economic Consultant to the Pampered

question 313

Multiple Choice

You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet Shop operates in a perfectly competitive industry. This firm is currently producing at a point where market price equals its marginal cost. The Shop's total revenue exceeds its total variable cost, but is less than its total cost. You should advise the firm to

• A) cease production immediately because it is incurring a loss.
• B) lower its price so that it can sell more units of output.
• C) produce in the short run to minimize its loss, but exit the industry in the long run.
• D) raise its price until it breaks even.

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Definitions:

Control Costs

The practice of managing and regulating expenses to ensure financial efficiency and organizational sustainability.

Theory Y

A management theory developed by Douglas McGregor that assumes employees are self-motivated, seek responsibility, and want to make creative contributions to the workplace.

Self-fulfilling Prophecies

Expectations about a subject that cause the subject to act in ways that confirm the expectations.

Adult Personality

The culmination of personality development over an individual's lifetime, showcasing stable psychological traits.