FIGURE 8-3 -Refer to Figure 8-3. When the Market Price Equals $105

question 103

Multiple Choice

FIGURE 8-3

-Refer to Figure 8-3. When the market price equals $105 and the firm sells 675 units of output, what can we conclude about the firm?

• A) It is experiencing a loss, but should continue operating temporarily because business conditions may improve.
• B) It is earning positive economic profits.
• C) It is earning a normal profit.
• D) It is experiencing a loss and should shut down.

---

Definitions:

Gross Profit Method

A method used in accounting to estimate the value of a company's inventory by applying the gross margin ratio to net sales.

Inventory

Consists of the goods and materials a business holds for the purpose of resale or production.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue. It is often referred to as the bottom line.

Error

A discrepancy or mistake found in a document, calculation, or process.