Suppose Robin's Clock Works Produces in a Perfectly Competitive Market

question 61

Multiple Choice

Suppose Robin's Clock Works produces in a perfectly competitive market. Suppose the average total cost of clocks is $95, the average variable cost of clocks is $90, and the price of clocks is $85. If the firm is producing the level of output where marginal cost equals price, then in the short run the firm

• A) should shut down.
• B) should continue to produce since total revenue exceeds total variable cost.
• C) is earning a positive economic profit.
• D) can increase profit by increasing output.

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Definitions:

Double Taxation

A taxation principle where income is taxed at both the corporate level and again at the individual level on dividends received.

Partnership Agreement

A formal arrangement between two or more parties to manage and operate a business and share its profits or losses in accordance with the terms set out in the agreement.

Bylaws

Internal rules adopted by an organization or corporation to govern its actions and decisions.

Financial Manager

A professional responsible for managing an organization's financial health by planning, directing, and controlling financial activities.