In the Short Run, a Perfectly Competitive Firm Will Shut

question 55

Multiple Choice

In the short run, a perfectly competitive firm will shut down if

• A) it incurs any economic loss.
• B) price equals average cost.
• C) total revenue is less than total variable cost.
• D) total revenue is less than total fixed cost.

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Definitions:

Factory Overhead

All indirect costs associated with the production process, such as utilities, maintenance, and salaries for managers.

Overapplied Overhead

A situation where the allocated manufacturing overhead costs are more than the actual overhead costs incurred.

Overhead Incurred

The actual indirect costs experienced by a company during production, including utilities, rent, and salaries of employees not directly involved in production.

Overhead Applied

The allocation of overhead costs to goods produced based on a predetermined rate.