The Graph Below Depicts the Cost Structure for a Firm

question 123

Multiple Choice

The graph below depicts the cost structure for a firm in a competitive market.
Figure 9-13

Refer to Figure 9-13. When price rises from P₃ to P₄, the firm finds that

• A) fixed costs are lower at a production level of Q₄.
• B) it can earn a positive profit by increasing production to Q₄.
• C) profit is still maximized at a production level of Q₃.
• D) average revenue exceeds marginal revenue at a production level of Q₄.

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Definitions:

Stock Split

A corporate action where a company divides its existing shares into multiple shares to boost the liquidity of the shares, although the overall value of the company does not change.

Common Stock

Equity securities that represent ownership in a corporation, giving holders voting rights and a share in the company's profits via dividends.

Outstanding

Unsettled or remaining due; not yet paid, resolved, or completed.

Stock Split

A decision by a company to increase the number of its outstanding shares by issuing more shares to current shareholders.