Which of the Following Statements Best Reflects the Production Decision

question 83

Multiple Choice

Which of the following statements best reflects the production decision of a profit-maximising firm in a competitive market when price falls below the minimum of average variable cost?

• A)the firm will immediately stop production to minimise its losses
• B)the firm will continue to produce to attempt to pay fixed costs
• C)the firm will stop production as soon as it is able to pay its sunk costs
• D)the firm will continue to produce in the short run but will likely exit the market in the long run

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Definitions:

Indirect Approach

A communication strategy that uses suggestion, implication, or other indirect methods rather than direct statements.

Obscure Bad News

The practice of hiding, downplaying, or obfuscating negative information to avoid negative reactions.

Limit Responsibility

The act of defining or restricting the amount of duty and accountability assigned to a person or organization.

Apologize

To express regret for an offense or fault.