If a Profit-Maximizing Firm in a Perfectly Competitive Market Is

question 164

Multiple Choice

If a profit-maximizing firm in a perfectly competitive market is currently producing the output where (price - average variable cost) > average fixed cost, the firm is

• A) making a positive economic profit.
• B) making a zero economic profit.
• C) suffering an economic loss.
• D) none of the above.

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Definitions:

High-Low Method

A technique used in cost accounting to estimate variable and fixed cost components of a cost by analyzing the highest and lowest activity levels.

Total Cost Equation

A formula that represents the total cost of manufacturing and selling products, typically defined as the sum of fixed costs plus variable costs.

Units Produced

The total number of complete products manufactured or finished during a specific period of time.

Domestic Fares

The price charged for flights within a country's borders.