Assume Price Exceeds Average Variable Cost Over the Relevant Range

question 161

Multiple Choice

Assume price exceeds average variable cost over the relevant range of demand.If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19, then to maximize profits the firm should

• A)continue to produce the same quantity.
• B)increase output.
• C)decrease output.
• D)shut down.

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Definitions:

Collected

The process of receiving payment for goods or services provided, often referring to the actual receipt of cash.

Minimum Cash Balance

The lowest amount of cash a business determines it needs on hand to meet its operational requirements.

Preliminary Cash Balance

An initial estimate of a company's cash balance at the beginning of a financial period, before any adjustments are made.

Cash Receipts

The total amount of cash collected by a business during a given period, including all sources of income.