If a Perfectly Competitive Firm Produces at an Output Level

question 92

Multiple Choice

If a perfectly competitive firm produces at an output level where marginal cost equals marginal revenue,then

• A)the last unit produced adds the same amount to costs as it does to revenue.
• B)the firm is maximizing its revenue.
• C)there is no reason to reduce or expand output,as long as AVC is greater than or equal to price.
• D)the difference between TR and TC is zero.
• E)the firm should shut down.

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Definitions:

Indirect Expenses

Costs that are not directly traceable to a specific cost object, such as the production of goods or services.

Decentralization

The distribution of decision-making power away from a central authority within an organization to lower levels or divisions.

Controllable Costs

Expenses that management can directly or indirectly control or influence in the short term, such as supplies and advertising.

Direct Expense

Costs that can be directly traced to a specific product, service, or department.