If the Profit-Maximizing Quantity of Production for a Competitive Firm

question 42

Multiple Choice

If the profit-maximizing quantity of production for a competitive firm occurs at a point where the firm's average total cost of production is falling as production increases, then the firm

• A)will be earning positive economic profit at the profit-maximizing quantity.
• B)will have economic profit less than zero at the profit-maximizing quantity.
• C)will have zero economic profit at the profit-maximizing quantity.
• D)should increase the quantity of production to increase profit.

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Definitions:

Debt To Total Assets Ratio

A financial metric indicating the proportion of a company's total assets that are financed by debt.

Times Interest Earned Ratio

A financial metric that compares a company's operating income to its interest expenses, used to evaluate its ability to meet its interest obligations.

Solvency

The ability of an entity to meet its long-term financial obligations and continue its operations indefinitely.

Leverage

Refers to the use of borrowed funds to finance the acquisition of assets, aiming to increase the returns to equity shareholders.