In the Standard Model of Pure Competition, a Profit-Maximizing Firm

question 66

Multiple Choice

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if

• A)marginal cost is greater than average revenue.
• B)average cost is greater than average revenue.
• C)average fixed cost is greater than average revenue.
• D)total revenue is less than total variable cost.

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Definitions:

Typical Gross Profit

The average gross profit a company makes after subtracting the cost of goods sold from its net sales.

FOB Shipping

Free On Board Shipping, a term used in shipping agreements to specify which party (buyer or seller) pays for shipping costs and when the ownership of the goods transfers.

Import Duties

Import duties are taxes imposed by a government on goods imported into a country, often used to protect domestic industries and raise revenue.

Merchandise Cost

Merchandise cost is the total expense incurred to purchase goods for resale, including the purchase price, shipping, handling, and import duties.