Which of the Following Statements Is Correct

question 234

Multiple Choice

Which of the following statements is correct?

• A) In order to maximize profits in the short run, a price taker should always produce at the output level where marginal cost is equal to price.
• B) In long-run equilibrium, a price taker will produce at an output level where average total cost is at its minimum.
• C) A price taker will remain open in the short run, even if it is earning an economic loss, so long as price is sufficient to cover average variable cost.
• D) All of the above are true.

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Definitions:

Year 2

Refers to the second year of a time-related context or sequence, not a standalone key term without additional context.

Contribution Margin

The amount of revenue remaining after subtracting variable costs, indicating how much contributes towards covering fixed costs and generating profit.

Per Unit

Refers to expressing costs, revenues, or other financial metrics on a per-unit basis to provide a standardized measure.

Absorption Costing

An accounting method that includes all manufacturing costs, both variable and fixed, in the cost of a product, and is used for external reporting purposes.