When Price Is Below Average Variable Cost, a Firm in a Competitive

question 451

Multiple Choice

When price is below average variable cost, a firm in a competitive market will

• A)shut down and incur fixed costs.
• B)shut down and incur both variable and fixed costs.
• C)continue to operate as long as average revenue exceeds marginal cost.
• D)continue to operate as long as average revenue exceeds average fixed cost.

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Definitions:

Salmon

A species of fish that is often found in the Northern Atlantic and Pacific oceans, known for their migration from ocean to freshwater to spawn.

Absolute Advantage

The ability of an individual, firm, or country to produce more of a good or service than competitors, using the same amount of resources.

Hamburgers

A type of food consisting of a cooked patty of ground meat, typically beef, placed inside a sliced bread roll or bun.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than others.