A Firm Will Continue to Produce in the Short Run

question 229

Multiple Choice

A firm will continue to produce in the short run even though economic profits are negative as long as

• A) the amount of the loss is no greater than the amount of fixed cost.
• B) MC = MR.
• C) it earned positive economic profits last year.
• D) it has fixed obligations to pay.

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Definitions:

Mark-Up Percentage

The proportion added onto the goods' purchase price to account for overhead costs and profit margins.

Variable Costs

Expenses that change in proportion to the activity or volume of operations in a business.

Cost-Plus Pricing

A pricing strategy where a fixed percentage or amount is added to the cost of producing a product or service to determine its selling price.

Full Cost

The total cost of production that includes both direct and indirect costs, such as raw materials, labor, and overhead.