A Competitive Firm Is Choosing an Output Level to Maximize

question 4

Multiple Choice

A competitive firm is choosing an output level to maximize its profits in the short run.Which of the following is not necessarily true? (Assume that marginal cost is not constant and is well defined at all levels of output.)

• A)Marginal cost is at least as large as average variable cost.
• B)Total revenues are at least as large as total costs.
• C)Price is at least as large as average variable cost.
• D)Price equals marginal cost.
• E)The marginal cost curve is rising.

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Definitions:

Cost Behaviours

The way in which different costs change in response to variations in the level of business activity or production volume.

Activity Levels

Refers to the quantity of work performed or production completed in a business within a specific period.

Target Sales Volume

The specific quantity of products a company aims to sell within a certain period to achieve its sales objectives and ensure profitability.

Fixed Costs

Expenses that remain constant regardless of how much is produced or sold, including items like rent, salaries, and insurance.