When Price Is Less Than Average Variable Cost at the Profit-Maximizing

question 4

Multiple Choice

When price is less than average variable cost at the profit-maximizing level of output,a firm should:

• A)continue to produce the level of output at which marginal revenue equals marginal cost if it is operating in the short run.
• B)continue to produce the level of output at which marginal revenue equals marginal cost if it is operating in the long run.
• C)shutdown, because it will lose nothing in that case.
• D)shutdown, because it cannot even cover all of its variable costs let alone its fixed costs if it stays in business.

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Definitions:

Hormones

Substances synthesized within the body that manage and direct the functions of specific cells or organs.

Computerized Axial Tomography

A medical imaging technique that uses computer-processed combinations of many X-ray measurements taken from different angles to produce tomographic images (virtual 'slices') of specific areas of a scanned object.

Brain

An organ of the central nervous system responsible for integrating sensory information and directing all voluntary and involuntary actions.

Chemicals

Substances composed of atoms or molecules, often used in the context of synthetic or industrial materials, but also encompassing all matter.