As the Price of a Good Increases

question 211

Multiple Choice

As the price of a good increases:

• A) it becomes profitable to produce more of the good as long as the costs of production stay the same.
• B) it becomes profitable to produce more of the good even with higher costs of production.
• C) demand for that good will decrease.
• D) suppliers will adjust their quantity supplied only if demand for the good declines.

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Definitions:

Total Costs

The complete costs associated with the production of specific goods or services, including fixed and variable costs.

Profit Maximizing

A company’s strategy aimed at adjusting their level of output until they achieve the highest possible profit.

Profit-Maximizing Number

The output level at which a firm achieves the highest possible profit, determined by revenue and cost structures.

Shutdown Quantity

The amount of output at which a company's revenue just covers its variable costs, prompting it to cease operations temporarily if prices fall below this level.