In the Long Run,all of a Firm's Costs Are Variable

question 23

Multiple Choice

In the long run,all of a firm's costs are variable.In this case the exit criterion for a profit-maximizing firm is to

• A)shutdown if price is less than average total cost.
• B)shutdown if price is greater than average total cost.
• C)shutdown if average revenue is greater than average fixed cost.
• D)shutdown if average revenue is greater than marginal cost.

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Definitions:

Efficiency Loss

The loss of economic efficiency that occurs when the equilibrium for a good or a service is not achieved or is not achievable.

Franchising

A business model that allows individuals or entities to operate a portion of a larger company's brand or system in exchange for fees and adherence to the company's policies.

Fast-Food Restaurants

Fast-food restaurants are eateries that offer quick service and a menu of food items that are prepared and served quickly to the customer, typically at lower cost.

Coase Theorem

A principle asserting that if property rights are well-defined and transaction costs are low, parties will negotiate to correct externalities and allocation resources efficiently, regardless of who holds the rights.