Suppose You Find That the Price of Your Product Is

question 43

Multiple Choice

Suppose you find that the price of your product is less than minimum AVC. You should

• A)minimize your losses by producing where P = MC.
• B)maximize your profits by producing where P = MC.
• C)close down because, by producing, your losses will exceed your total fixed costs.
• D)close down because total revenue exceeds total variable cost.

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Definitions:

Marginal Cost-Benefit Calculations

The process of evaluating whether the additional benefits of an action or investment outweigh its additional costs.

Average Fixed Costs

The total fixed costs of production divided by the quantity of output produced, representing how fixed costs spread out over units of output as production increases.

Total Costs

Total costs are the sum of all expenses incurred in the production of goods or services, including both fixed and variable costs.

Total Variable Costs

The summation of all costs that vary with the level of output, such as raw materials and labor costs, differing from fixed costs.