If a Profit-Maximizing Firm Finds That Price Exceeds Average Variable

question 115

Multiple Choice

If a profit-maximizing firm finds that price exceeds average variable cost and marginal revenue is greater than marginal cost,it should:

• A) reduce output, but continue producing in the short run.
• B) increase output.
• C) shut down.
• D) not alter its production level since it is earning a profit.

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Definitions:

Intolerance Of Error

A psychological state or organizational culture where mistakes are not tolerated, leading to high stress and potential stifling of creativity or learning.

Independent Variable

In an experiment, the variable that is manipulated or altered by the researcher to observe its effect on the dependent variable.

Dependent Variable

The variable in a study that is expected to change in response to changes in the independent variable, often measured to assess the effect of a treatment.

Experimental Group

The group in an experiment that receives the treatment or condition being tested, as opposed to the control group.