Below the Short-Run Shutdown Price, the Firm

question 181

Multiple Choice

Below the short-run shutdown price, the firm

• A) is earning positive economic profits.
• B) is earning negative economic profits.
• C) is making a normal rate of return on its capital investment.
• D) may be earning a positive or negative economic profits depending upon costs.

---

Definitions:

Stockholders' Equity

The ownership interest of shareholders in the assets of a corporation after all debts have been paid.

Retained Earnings

Retained earnings are the portion of a company's profits that are kept or reinvested in the business instead of being distributed to shareholders as dividends.

Weighted-average Shares

A calculation used in accounting and finance to determine the average number of shares outstanding in a company, adjusted for stock splits and other changes.

Price-earnings Ratio

A financial metric comparing a company's market price per share to its earnings per share, indicating the value given by the market for each dollar of earnings.