A Profit-Maximizing Firm Will Shut Down in the Short Run

question 391

Multiple Choice

A profit-maximizing firm will shut down in the short run when

• A)price is less than average variable cost.
• B)price is less than average total cost.
• C)average revenue is greater than marginal cost.
• D)average revenue is greater than average fixed cost.

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Definitions:

Current Liability

Financial obligations a company owes and is expected to pay within a year.

Long-term Liability

A debt or obligation not due within the current accounting year, requiring repayment over a longer period.

Warranty Repairs

Services provided to repair or fix products free of charge under a warranty agreement, considered a contingent liability when the product is sold.

Parts Inventory

The stock of components or parts kept on hand by a company to assemble products or perform service maintenance.