If a Firm's Average Cost Is Declining, Setting Price Equal

question 40

Multiple Choice

If a firm's average cost is declining, setting price equal to marginal cost will

• A)maximize the firm's profits.
• B)minimize the firm's losses.
• C)guarantee that the firm will lose money.
• D)help the firm earn the opportunity costs of its resources.

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Definitions:

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, typically with dividends that must be paid out before dividends to common stockholders.

Par Value

A nominal or face value assigned to a share of stock by the company's charter, which may not reflect the actual market value.

Paid-In Capital

Funds raised by a company from selling its shares to investors, beyond the nominal value of the shares.

Cash Dividend

A payment made by a company out of its earnings to investors in the form of cash.