A Firm Is Currently Producing an Output at Which Price

question 276

Multiple Choice

A firm is currently producing an output at which price equals the minimum point on the average variable cost curve. If wage rates increase, the firm will

• A) increase its rate of output to make up for the higher variable costs.
• B) shut down since it would no longer be covering its variable costs.
• C) decrease its rate of output to offset the higher variable costs.
• D) not make any changes since its current rate of output is still minimizing its losses.

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Definitions:

Paid Wages

Refer to the sum of money paid to employees as compensation for their labor, including salaries, hourly wages, and commissions.

Accounting Equation

The fundamental formula in accounting that represents the relationship between a company's assets, liabilities, and shareholders' equity: Assets = Liabilities + Equity.

Investment Of Land

The act of spending money to purchase land as an investment, with the expectation that it will appreciate in value.

Accounting Equation

The foundational principle of accounting stating that Assets = Liabilities + Owner’s Equity, representing the structure of a balance sheet.