If Price Is Above Average Variable Cost and Below Average

question 143

Multiple Choice

If price is above average variable cost and below average total cost, a profit-maximizing price taker should

• A) immediately shut down; failing to do so is contrary to the idea of profit maximization in a competitive market.
• B) continue producing as long as it expects the market price to rise above average total cost in the near future.
• C) attempt to push price upward by slowly reducing output.
• D) cut price so more units can be sold.

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Definitions:

Euthanized

The act of deliberately ending the life of an animal to relieve it of incurable disease or suffering in a manner that minimizes or eliminates pain and distress.

Bimodal

Describes a distribution or dataset having two distinct modes or peaks.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how much the values of a dataset differ from the mean of the dataset.

IQR

The interquartile range, a measure of statistical dispersion representing the difference between the 25th and 75th percentiles.