Figure 12-9 Figure 12-9 Shows Cost and Demand Curves

question 236

Multiple Choice

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-If a firm shuts down in the short run,

• A) its loss equals zero.
• B) its loss equals its fixed cost.
• C) it makes zero economic profit.
• D) its total revenue is not large enough to cover its fixed cost.

---

Definitions:

Required Returns

The minimum profit or yield that investors demand for investing in an asset, considering the risk involved.

Risk Premium

The additional return an investor requires to invest in an asset over a risk-free rate, compensating for the risk of the investment.

Yield

The income return on an investment, such as the interest or dividends received, often expressed as an annual percentage based on the investment’s cost, current market value, or face value.

CAPM Approach

The Capital Asset Pricing Model, a formula used to determine the expected return on investment (ROI) by correlating the risk and expected return.