If a Company Has a Positive Contribution Margin, the Maximum

question 88

Multiple Choice

If a company has a positive contribution margin, the maximum amount of loss that it can have is equal to its:

• A) Fixed costs
• B) Variable costs
• C) Fixed and variable costs
• D) None of these are correct

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Definitions:

Perfect Competition

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information that leads to firms being price takers.

Short-Run Supply Curve

A graphical representation showing the quantity of goods a firm is willing and able to supply at different prices in a given short-term period, holding some factors constant.

Marginal Cost Curve

A graph that displays how the expense of producing one additional unit of a good changes as production volume varies.

Average Variable Cost

The variable cost per unit of output.