If a Competitive Firm Is (I)selling 1,000 Units of Its

question 18

Multiple Choice

If a competitive firm is (i) selling 1,000 units of its product at a price of $9 per unit and (ii) earning a positive profit,then

• A) its total cost is less than $9,000.
• B) its marginal revenue is less than $9.
• C) its average revenue is greater than $9.
• D) the firm cannot be a competitive firm since competitive firms can only earn zero profit.

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Definitions:

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value over time due to use and wear and tear.

Units-Of-Production

A depreciation method that allocates expense based on the actual usage or production levels of an asset.

Double-Declining-Balance

A method of accelerated depreciation that doubles the straight-line depreciation rate, reducing the asset's book value more quickly in the early years of its life.

Straight-Line Method

A method of calculating the depreciation of an asset where the asset's cost is evenly spread over its useful life.