When Should a Profit-Maximizing, Price-Taking Firm Cease Production

question 139

Multiple Choice

When should a profit-maximizing, price-taking firm cease production?

• A) whenever the firm is making a loss
• B) whenever the firm is earning zero economic profit
• C) whenever the price is less than minimum average variable cost
• D) whenever the price is less than minimum average fixed cost

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Definitions:

Yield

The annual percentage yield received from an investment, including interest or dividends, relative to the cost of that investment.

Rate Anticipation Swap

A switch made between bonds of different durations in response to forecasts of interest rates.

Portfolio Duration

A measure of the sensitivity of a portfolio's value to changes in interest rates, often used for managing the interest rate risk.

Interest Rates

The expense associated with obtaining a loan, or the incentive for depositing funds, usually shown as a percentage of the original amount.