In the Short Run, a Firm Operating in a Competitive

question 386

Multiple Choice

In the short run, a firm operating in a competitive industry will shut down if price is

• A)less than average total cost.
• B)less than average variable cost.
• C)greater than average variable cost but less than average total cost.
• D)greater than marginal cost.

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Definitions:

Fixed Manufacturing Overhead

Costs associated with manufacturing that do not vary with the level of production, such as rent and salaries.

Volume Variance

The difference between the budgeted and actual volume of production, affecting the budgeted levels of costs or revenues.

Budgeted

The process of creating a plan for a company's financial operations, encompassing revenue, expenses, and capital usage.

Direct Labor-Hours

A measure of the total hours worked by employees who are directly involved in the manufacturing or production process.