If a Competitive Firm Is Currently Producing a Level of Output

question 430

Multiple Choice

If a competitive firm is currently producing a level of output at which profit is not maximized, then it must be true that

• A)marginal revenue exceeds marginal cost.
• B)marginal cost exceeds marginal revenue.
• C)total cost exceeds total revenue.
• D)None of the above is correct.

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Definitions:

Short Run

A period in economic analysis during which at least one input (like capital) is fixed, limiting the ability of the firm to adjust to changes in market demand or conditions.

Break-Even Point

The point at which total costs and total revenues are equal, meaning a business is not making a profit but also not incurring a loss.

Short Run

A period in which at least one factor of production is fixed, limiting the immediate capacity to adjust to changes in demand.

Long Run

A time frame where every production factor and cost can change, providing complete flexibility to adapt to new situations.