In the Short Run, a Firm Will

question 123

Multiple Choice

In the short run, a firm will

• A) not produce if its total revenue does not cover its total cost.
• B) produce and incur an economic loss if its total revenue covers its total variable cost but not its total cost.
• C) produce and break even if its total revenue covers its total fixed cost but not its total variable cost.
• D) produce and earn an economic profit if its total revenue is equal to its total cost.

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Definitions:

Outstanding Checks

Checks that have been written and recorded in a company’s ledger but have not yet been cleared or deducted from the bank account balance.

Credit Memo

A document issued by a seller to a buyer, reducing the amount owed by the buyer under certain circumstances, such as returned goods or an overcharge.

Debit Memo

A document issued by a seller of goods or services to a buyer, reducing the amount the buyer owes under the original invoice.

General Ledger

An exhaustive list of every financial transaction made by a company during its history, categorized by accounts.