A Firm Finds That at Its MR = MC Output

question 157

Multiple Choice

A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should

• A) shut down in the short run.
• B) produce because the resulting loss is less than its TFC.
• C) produce because it will realize an economic profit.
• D) liquidate its assets and go out of business.

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Definitions:

Secured Creditor

A creditor that has a legal interest, usually called a lien, in a debtor’s property, securing the debt and giving the creditor rights to the property if the debt is not repaid.

Collateral

Assets pledged by a borrower to secure a loan, which can be seized by the lender if the loan is not repaid.

Security Interest

A legal claim or lien on assets which secures the performance of an obligation, usually repayment of a loan.

Present and After-Acquired Equipment

Refers to a security interest in equipment that a borrower currently owns and any equipment they will acquire in the future.