The Excess of Price Over Marginal Cost Is Not the Best

question 61

Multiple Choice

The excess of price over marginal cost is not the best measure of profit per unit because:

• A)marginal cost is not always equal to average cost.
• B)it shows the accounting profit of a firm and not the economic profit.
• C)it does not take into account the variable costs of the firm.
• D)profitable firms produce at a level where price is less than marginal cost.

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Definitions:

Quotas

Limits set on the quantity of a product that can be imported or exported during a given timeframe, used as a trade policy tool.

Specified Time Periods

Designated or clearly defined intervals of time within which certain actions are performed or conditions are to be met.

Exchange Controls

Regulatory measures imposed by a government on the buying/selling of foreign currencies or on the movement of currencies out of a country.

Exchange Control

Restriction on importation of certain products or against certain companies to reduce trade and expenditures of foreign currency.