The Graph Shown Represents the Cost and Revenue Curves of a Firm

question 80

Multiple Choice

The graph shown represents the cost and revenue curves of a firm in a perfectly competitive market. If the firm is producing at Q1:

• A)profits are being maximized.
• B)average total costs exceed the market price.
• C)it should not increase production because it will earn loss.
• D)marginal revenue is greater than average total cost.

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Definitions:

Production Budget

A detailed plan showing the number of units that must be produced during a period in order to satisfy both sales and inventory needs.

Direct Materials Budget

A detailed plan showing the amount of raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories.

Production Budget

An estimate of the total amount of production, often expressed in units, that a company plans to manufacture during a specific period.

Finished Goods Inventory

The stock of completed products that are ready to be sold but are still in the company's inventory.