At the Level of Output Where Marginal Revenue Equals Marginal

question 69

Multiple Choice

At the level of output where marginal revenue equals marginal cost, price is less than average total cost but greater than average variable cost. In this instance, what action should a profit-maximizing firm take?

• A) Continue operating at that output level in the short term, since total revenue will cover all of the firm's fixed costs and a portion of its variable costs.
• B) Decrease output to where marginal revenue exceeds marginal cost by the greatest dollar amount.
• C) Continue operating at that output level in the short term, since total revenue will cover all of the firm's variable costs and some of its fixed costs.
• D) Cease production, as it is incurring an economic loss.

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Definitions:

UCC

The Uniform Commercial Code, a comprehensive set of laws governing commercial transactions in the United States, including sales, leases, and negotiable instruments.

Check

A written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer or a named party.

Holder in Due Course

A legal term describing a person who has acquired a negotiable instrument in good faith and has the right to collect on it, free from many defenses.

Due Diligence

The investigation or exercise of care that a reasonable business or person is expected to take before entering into an agreement or a financial transaction with another party.