A Firm Stands to Gain by Operating Instead of Shutting

question 184

Multiple Choice

A firm stands to gain by operating instead of shutting down as long as ________ sufficiently covers ________.

• A) price; average variable cost
• B) price; average fixed cost
• C) total revenue; total fixed costs
• D) operating profit; economic profit

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Definitions:

Period Cost

Costs unrelated to the direct production process, recognized as expenses in the period they happen, encompassing sales, general, and administrative expenditures.

Plant Manager

A professional who oversees all operations of a manufacturing facility, including personnel, production processes, and budget management.

Salary

A fixed regular payment, typically expressed as an annual amount, made by an employer to an employee, especially a professional or white-collar worker.

Product Cost

The total expense incurred to produce a product, including costs directly tied to manufacturing such as raw materials and labor, differentiated by highlighting its importance in pricing and profitability analysis.