Exhibit 7-3 Cost Per Unit Curves

question 82

Multiple Choice

Exhibit 7-3 Cost per unit curves

If the price of the firm's product in Exhibit 7-3 is $1.50 per unit, which intersects AVC at point B, the firm should:

• A) continue to operate because it is earning a positive economic profit.
• B) stay in operation for the time being even though it is making an economic loss.
• C) shut down temporarily.
• D) increase the price.

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Definitions:

Investment Turnover

A ratio that measures the efficiency with which a company is able to generate revenue from its investments in assets.

Standard Costs

Predetermined or estimated costs used to measure the performance of a company based on the efficient use of labor and materials.

Actual Costs

The realized expenses incurred in the production of goods or services, as distinguished from estimated costs or budgeted amounts.

Principle of Exceptions

A management principle focusing on the identification and handling of cases that deviate from the norm.