At the Level of Output Where Marginal Revenue Equals Marginal

question 48

Multiple Choice

At the level of output where marginal revenue equals marginal cost,price is less than average total cost but greater than average variable cost.In this instance,a profit-maximizing firm should:

• A) cease production as it is incurring an economic loss.
• B) continue operating at that output level in the short term, since total revenue will cover all of the firm's variable costs and some of its fixed costs.
• C) continue operating at that output level in the short term, since total revenue will cover all of the firm's fixed costs and a portion of its variable costs.
• D) decrease output to where marginal revenue exceeds marginal cost by the greatest dollar amount.

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Definitions:

Accounts Receivable Subsidiary Ledger

is a detailed ledger showing individual transactions and balances for customers who owe money to the business, supplementing the general ledger.

Control Account

A general ledger account that summarizes and controls the total amounts recorded in subsidiary ledgers.

Cash Sales

Transactions where payment is made in cash at the time of purchase.

Monthly

Pertaining to or calculated for a period of one month.