-Figure 8-13 Shows a Firm's Total Variable Cost and Total

question 45

Multiple Choice

-Figure 8-13 shows a firm's total variable cost and total revenue curves.In the short run,this firm

• A)should shut down
• B)should produce all units of output for which marginal cost exceeds marginal revenue
• C)should produce at the output level where the marginal cost curve crosses the marginal revenue curve from below
• D)should produce at the output level where the marginal cost curve crosses the marginal revenue curve from above
• E)needs additional information in order to decide whether to operate

---

Definitions:

Fixed Manufacturing Overhead

Indirect production costs that remain constant regardless of the level of production, such as rent and salaries of managers.

Fixed Manufacturing Overhead

The consistent, indirect costs associated with manufacturing that do not vary with the level of production, such as rent, insurance, and salaries of permanent staff.

Variable Costing

A costing method that includes only variable production costs (direct materials, direct labor, and variable overhead) in product costs, excluding fixed overhead.

Absorption Costing

A method of product costing that incorporates all manufacturing costs, including both fixed and variable costs, in the price of a product.