In the Long Run, a Profit-Maximizing Firm Will Choose to Exit

question 330

Multiple Choice

In the long run, a profit-maximizing firm will choose to exit a market when

• A)average fixed cost is falling.
• B)variable costs exceed sunk costs.
• C)marginal cost exceeds marginal revenue at the current level of production.
• D)total revenue is less than total cost.

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Definitions:

Total Cost

The sum of all costs incurred in the production of goods or services, including both fixed and variable costs.

Discretionary Fixed Cost

A fixed expense that can be easily changed or eliminated, such as advertising or research and development.

Research Costs

Expenses associated with conducting research activities, often including but not limited to, development, testing, and innovation costs.

Depreciation

A method of allocating the cost of a tangible asset over its useful life.