A Firm Will Shut Down Temporarily When the Price Is

question 91

Multiple Choice

A firm will shut down temporarily when the price is so low that total revenue is insufficient to cover the

• A)total cost of production.
• B)total variable cost of production.
• C)total fixed cost of production.
• D)marginal cost of production.
• E)average variable cost of production.

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Definitions:

Required Return

The minimum return that an investor expects to achieve by investing in a particular asset, taking into account the asset's risk.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in an equal annual amount.

Net Working Capital

The difference between a company's current assets and current liabilities.

Variable Costs

Expenses that change in proportion to the activity of a business such as costs for raw material which increase as production increases.