A Profit-Maximizing Firm Should Shut Down in the Short Run

question 118

Multiple Choice

A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than

• A) average variable cost.
• B) average total cost.
• C) average fixed cost.
• D) marginal cost.

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Definitions:

Worn-Out Capital

Assets that have reached the end of their useful life in production processes, often leading to decreased efficiency and increased maintenance costs.

National Income Accounting

A statistical approach that measures the overall economic activity and income of a country.

Economic Welfare

The overall well-being and standard of living of people in an economy, often measured by standards such as health, education, and income.

Negative Externalities

occur when the production or consumption of goods and services imposes costs on third parties not involved in the transaction.