If, for a Given Output Level, a Perfectly Competitive Firm's

question 153

Multiple Choice

If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, the firm

• A)is earning a profit.
• B)should shut down.
• C)should increase output.
• D)should increase price.

---

Definitions:

Return On Assets

A financial ratio indicating how profitable a company is relative to its total assets, measuring efficiency in using assets to generate earnings.

Earnings Before Interest And Taxes

A financial metric indicating the profitability of a business before accounting for interest and tax expenses.

Excess Capacity

The situation in which a facility or operation can produce more than is being demanded by its customers.

Distribution Sites

Locations where goods are stored and distributed to retailers or directly to customers.