If Price Is Below Average Total Cost, a Profit- Maximising

question 4

Multiple Choice

If price is below average total cost, a profit- maximising firm will:

• A) raise the price level
• B) lower the price level to increase sales
• C) continue to operate as long as average revenue is greater than average variable cost
• D) shut down, as it cannot cover its total costs

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Definitions:

Surplus

An excess of revenues over expenses in a budget, or an excess of goods or materials than what is needed.

Price Floor

A government-imposed minimum price that can be charged for a good or service, aimed at preventing prices from falling too low.

Quantity Supplied

Refers to the amount of a good or service that producers are willing to sell at a given price over a specific period.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price.