A Competitive Firm Faces Fixed Costs Even If It Produces

question 145

Multiple Choice

A competitive firm faces fixed costs even if it produces zero output. If it starts producing and selling some output, which of the following would happen?

• A) The firm's total costs would increase, and its losses may become larger.
• B) The firm would earn revenues and will therefore earn positive profits.
• C) The firm's total costs would decrease, allowing it to possibly earn profits.
• D) The firm would earn revenues that are greater than its costs.

---

Definitions:

Trade-In Allowance

The discount or amount credited to a buyer when they trade in an old item towards the purchase of a new item.

List Price

The manufacturer's suggested retail price (MSRP) of a product, before any discounts, coupons, or negotiations.

Peak Seasonal

Periods during which demand for certain goods or services increases significantly, often related to the time of year.