If a Firm's Minimum Point on the ATC Curve Is

question 171

Multiple Choice

If a firm's minimum point on the ATC curve is $15 and on the AVC curve is $10, what is the firm's optimal strategy in the short run if the market price is $12 and it is producing where MR = MC?

• A) The firm should shut down immediately because it is losing money.
• B) The firm should increase production to reduce costs in the short run.
• C) The firm should continue producing where MR = MC to limit its losses.
• D) The firm should decrease production in order to reduce short-term production costs.

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Definitions:

Periodic Inventory System

An accounting method where inventory is physically counted and valued at set intervals, affecting the cost of goods sold calculation.

Discounts Lost

Refers to the additional cost a company incurs for not taking advantage of the cash discounts offered by suppliers for early payments.

Net Method

The Net Method is an accounting procedure that records the purchase of goods or services after deducting any discounts for early payment.

Internal Control

The process implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.