If Price Is Greater Than Average Variable Cost and Less

question 180

Multiple Choice

If price is greater than average variable cost and less than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

• A) produce at an economic loss.
• B) produce at an economic profit.
• C) shut down production.
• D) produce more than the profit-maximizing quantity.

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Definitions:

Equity Method

An accounting technique used by a company to record investments in other companies where it has significant influence but does not have full control.

Consolidated Financial Statements

Financial statements that combine the financial information of a parent company with its subsidiaries to present a single set of statements for the entire group.

FVTPL

Fair Value Through Profit or Loss, an accounting strategy whereby financial assets are valued at their current market price, with changes in fair value recorded in the profit or loss statement.

Equity Method

An accounting technique used by a company to record its investment in another company when it has significant influence but not complete control.