Suppose That at a Firm's Profit-Maximizing Level of Output, Its

question 143

Multiple Choice

Suppose that at a firm's profit-maximizing level of output, its total revenue is $1,250, the total cost of its variable factors of production is $1,000, and its total fixed cost is $500. This firm will ________ in the short run, and will ________ in the long run.

• A)shut down; reopen for business
• B)earn a profit; earn a loss
• C)earn a loss; earn a profit
• D)not shut down; exit the industry

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Definitions:

Inventory

The goods and materials that a business holds for the ultimate goal of resale or use in production.

Stockholders' Equity

The ownership share of shareholders in a corporation, calculated as the value of assets minus liabilities.

Retained Earnings

The portion of net income that is not distributed to shareholders as dividends but is retained by the company for reinvestment.

Assets

Economic resources owned by a business or company that are expected to provide future benefits or value.