A Competitive Firm Faces Fixed Costs Even If It Produces

question 263

Multiple Choice

A competitive firm faces fixed costs even if it produces zero output. If it starts producing and selling some output, which of the following would happen?

• A)The firm's total costs would increase, and its losses may become larger.
• B)The firm would earn revenues and will therefore earn positive profits.
• C)The firm's total costs would decrease, allowing it to possibly earn profits.
• D)The firm would earn revenues that are greater than its costs.

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Definitions:

Servicing Debt

The process of paying interest and principal on borrowed funds, typically on a regular basis.

Trade Deficit

A situation where a country's imports of goods and services exceed its exports, leading to a negative balance of trade.

Publicly Held

Refers to a company owned by public investors through publicly traded shares, as opposed to being privately owned.

Public Sector

The part of the economy that is controlled by the government including various services and industries such as healthcare, education, and transportation.