A Competitive Firm Has Been Selling Its Output for $20

question 367

Multiple Choice

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price rises to $25, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its

• A)quantity of output is higher than it was previously.
• B)average total cost is higher than it was previously.
• C)marginal revenue is higher than it was previously.
• D)All of the above are correct.

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Definitions:

Accounts Receivable

Financial obligations of customers to a firm for delivered or utilized goods or services that remain unpaid.

Direct Write-off Method

An accounting method where uncollectible accounts receivable are directly written off against income at the time they are deemed uncollectible.

Uncollectible Receivables

Amounts owed to a company that it does not expect to collect and thus considers a loss.

Journalize

The process of recording transactions in an accounting journal, noting the debit and credit aspects of each transaction.