Which of the Following Statements Best Reflects the Production Decision

question 356

Multiple Choice

Which of the following statements best reflects the production decision of a profit-maximizing firm in a competitive market when price falls below the minimum of average variable cost?

• A)The firm will continue to produce to attempt to pay fixed costs.
• B)The firm will immediately stop production to minimize its losses.
• C)The firm will stop production as soon as it is able to pay its sunk costs.
• D)The firm will continue to produce in the short run but will likely exit the market in the long run.

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Definitions:

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A fundamental principle in geometry stating that in a right-angled triangle, the square of the length of the hypotenuse is equal to the sum of the squares of the lengths of the other two sides.

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