When Price Exceeds Average Variable Cost in the Short Run

question 558

Multiple Choice

When price exceeds average variable cost in the short run, a competitive firm's marginal cost curve is regarded as its supply curve because

• A)the position of the marginal cost curve determines the price for which the firm should sell its product.
• B)among the various cost curves, the marginal cost curve is the only one that slopes upward.
• C)the marginal cost curve determines the quantity of output the firm is willing to supply at any price.
• D)the firm is aware that marginal revenue must exceed marginal cost in order for profit to be maximized.

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Definitions:

Operating Expense

Refers to the costs associated with the day-to-day functions of a business, excluding costs related to production.

Credit Terms

Conditions under which a seller will extend credit to a buyer, including repayment periods and interest rates.

Merchandise Return

Occurs when customers return previously purchased products to the seller, typically resulting in a refund or store credit.

Account Settlement

The process of reconciling and closing an account by paying off any outstanding balance.