If at the MC = MR Output, AVC Exceeds Price

question 22

Multiple Choice

If at the MC = MR output, AVC exceeds price,

• A)new firms will enter this industry.
• B)the firm should produce the MC = MR output and realize an economic profit.
• C)some firms should shut down in the short run.
• D)the firm should expand its plant.

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Definitions:

Expected Return

The calculated average of the possible returns for an investment, weighted by the likelihood of each outcome.

Constant-Growth DDM

A model that calculates a stock's value by assuming dividends will increase at a steady rate forever, known as the dividend discount model with constant growth.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates that the stock is more volatile than the market.

Dividend

A portion of a company's earnings that is paid to shareholders, typically on a regular basis.