When Price Is Greater Than Marginal Cost for a Firm

question 140

Multiple Choice

When price is greater than marginal cost for a firm in a competitive market,

• A) marginal cost must be falling.
• B) the firm must be minimizing its losses.
• C) there are opportunities to increase profit by increasing production.
• D) the firm should decrease output to maximize profit.

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Definitions:

Defective Merchandise

Goods that fail to meet quality standards and are therefore returned, repaired, or sold at a discounted price.

Selling Price

Selling price is the amount of money for which a seller is willing to sell his or her product or service.

Sales Allowance

A reduction in the sale price granted by the seller to the buyer, often due to minor defects or because the buyer has returned part of the order.

Sales Returns

Transactions where customers return previously purchased merchandise for a refund, replacement, or credit toward future purchases.