If the Price of a Product Falls Below Average Total

question 121

Multiple Choice

If the price of a product falls below average total cost in the short run, the firm:

• A) has an economic profit.
• B) cannot cover total fixed costs.
• C) experiences a loss.
• D) must always shut down.

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Definitions:

Marginal Revenue

The additional income from selling one more unit of a good; it is the change in total revenue that comes from selling an additional unit.

Demand Schedule

A table that shows the quantity of a good or service that consumers are willing to buy at various prices.

Coefficient of Price Elasticity

A measure of the responsiveness of the quantity demanded of a good to a change in its price.

Demand Schedule

A table or graph showing the quantity of a product or service demanded at various prices.