Suppose That When a Perfectly Competitive Firm Produces 500 Units

question 111

Multiple Choice

Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm:

• A)should shut down.
• B)should not shut down if its total variable cost is less than $750.
• C)is not maximizing its profit.
• D)should produce more than 500 units a day.

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Definitions:

Transportation to Consignees

The costs incurred to transport goods to consignees, who will sell the goods on behalf of the shipping party.

Cost Recovery Method

An accounting technique used to defer the recognition of income until the cash received from a transaction exceeds the costs associated with it.

Realized Gross Profit

The gross profit that is actually earned and recognized on sales transactions, after the cost of goods sold has been deducted.

Cash Collections

The process of gathering and managing the cash from sales, financing, or other sources of revenue for a business.