When Price Is Greater Than Average Variable Cost but Less

question 102

Multiple Choice

When price is greater than average variable cost but less than average total cost at the profit-maximizing level of output,a firm should:

• A)continue to produce the level of output at which marginal revenue equals marginal cost.
• B)increase output to minimize its losses.
• C)reduce output to the level at which price equals average variable cost to minimize its losses.
• D)shutdown to minimize its losses.

---

Definitions:

Systematic Risk

The risk inherent to the entire market or market segment, also known as market risk, which cannot be avoided through diversification.

Asset-specific Risk

The risk that affects the value of a particular asset, such as changes in its market or sector, distinct from market-wide risk.

Unsystematic Risk

The risk associated with an individual asset or investment, distinct from market-wide risks.

Risk-free Rate of Return

The theoretical return on an investment with zero risk, typically based on government bonds.