If a Perfectly Competitive Firm's Total Revenue Is Less Than

question 214

Multiple Choice

If a perfectly competitive firm's total revenue is less than its total variable cost, the firm

• A)should raise its price above its average variable cost.
• B)should continue to produce and increase its demand.
• C)should stop production by shutting down temporarily.
• D)should adopt new technology in order to lower its costs of production.

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Definitions:

Profit-maximizing

The process of making business decisions that aim to increase the difference between total revenues and total costs to the highest possible level.

Marginal Revenue Product

The additional revenue generated by employing one more unit of a factor, such as labor or capital.

Marginal Revenue Product

The additional revenue generated from using one more unit of an input in the production process.

Wage Rate

The amount of compensation a worker receives per unit time or per unit of output, often expressed per hour or piece.