If Price Falls Below Minimum Average Variable Cost,the Best a Firm

question 15

Multiple Choice

If price falls below minimum average variable cost,the best a firm can do is

• A)increase production and incur a loss equal to total variable cost.
• B)increase production and incur a loss equal to total fixed cost.
• C)stop production and incur a loss equal to total fixed cost.
• D)stop production and incur a loss equal to total variable cost.
• E)stay at the same production level and incur a loss equal to the difference between total cost and total revenue.

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Definitions:

Days' Cash on Hand

A financial metric indicating the number of days a company can continue to operate using only its available cash, without additional income.

Cash Account

A financial record that tracks the cash transactions of a business, reflecting all inflows and outflows of cash.

Evaluating Across Companies

The process of comparing financial performance, strategies, and metrics of different companies within the same industry.

Petty Cash Fund

A small amount of cash kept on hand for minor or incidental expenses within a business.