Which of the Following Statements Best Reflects the Production Decision

question 356

Multiple Choice

Which of the following statements best reflects the production decision of a profit-maximizing firm in a competitive market when price falls below the minimum of average variable cost?

• A)The firm will continue to produce to attempt to pay fixed costs.
• B)The firm will immediately stop production to minimize its losses.
• C)The firm will stop production as soon as it is able to pay its sunk costs.
• D)The firm will continue to produce in the short run but will likely exit the market in the long run.

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Definitions:

Group Cohesiveness

The extent to which members of a group are attracted to each other and are motivated to stay in the group, which affects the group's performance.

Performance Success

The degree to which an individual or organization achieves its objectives and meets expected standards of excellence.

Crisis

A critical or tumultuous situation that requires a decisive response.

Performance Norms

The accepted standards or expectations of performance within a group or organization.