A Firm Finds That at Its MR = MC Output

question 157

Multiple Choice

A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should

• A) shut down in the short run.
• B) produce because the resulting loss is less than its TFC.
• C) produce because it will realize an economic profit.
• D) liquidate its assets and go out of business.

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Definitions:

Ease of Formation

The simplicity with which a new business or organization can be legally established.

Treasury Stock

Shares bought back by the issuing company, reducing the amount of outstanding stock on the open market.

Financing Activities

These pertain to transactions involving raising capital and repaying it to investors, including the payment of dividends, in the statement of cash flows.

Common Stock Cash Dividend

A payment made to shareholders out of a company's earnings, specifically to common stockholders.