If a Profit-Maximizing Firm Finds That Price Exceeds Average Variable

question 3

Multiple Choice

If a profit-maximizing firm finds that price exceeds average variable cost and marginal cost is greater than marginal revenue, what action should it take?

• A) reduce output, but continue producing in the short run
• B) shut down
• C) increase output
• D) not alter its production level, since it is earning a profit

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Definitions:

Job Evaluation

An administrative procedure for measuring the relative internal worth of the organization's jobs.

Pay Structures

The organization of different levels of pay within a company or organization, based on roles, responsibilities, and performance.

Significant

Refers to something that is important, meaningful, or consequential within a particular context or study.

Position Analysis Questionnaire

A standardized job analysis instrument that evaluates job characteristics and relates them to human characteristics.