In the Short-Run,if the Price Falls,the Firm Will Respond By

question 45

Multiple Choice

In the short-run,if the price falls,the firm will respond by:

• A)liquidating its assets and shutting down.
• B)producing at the output level where average variable cost is equal to marginal revenue.
• C)reducing output along its marginal cost curve as long as marginal revenue exceeds average variable cost.
• D)increasing its output in order to sell higher quantities.

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Definitions:

Cost-plus Pricing

A pricing strategy where a fixed percentage or specified amount is added to the production cost to determine the sell price of a product or service.

Return on Investment

A profitability metric calculated as the net gain from an investment relative to its initial cost, used to measure the efficiency or profitability of an investment.

Selling Price

The sum a purchaser spends to acquire a good or service from a vendor.

Absorption Costing

A cost accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.