In Which Market Structure Will a Firm Choose Not to Shut

question 8

Multiple Choice

In which market structure will a firm choose not to shut down when price is less than average variable cost?

• A) Perfect competition
• B) Monopoly
• C) Monopolistic competition
• D) None of the above. All firms will shut down when P < AVC.

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Definitions:

Income Statement

A financial statement that shows a company's revenues, expenses, and profitability over a specified period of time, providing insight into its financial performance.

Absorption Costing

An accounting method where all manufacturing costs, including both fixed and variable costs, are allocated to produced units.

Direct Labor Cost

The total cost of wages paid to workers directly involved in manufacturing a product or delivering a service.

Fixed Manufacturing Overhead

The total of all manufacturing costs that do not vary with the level of production, such as rent, salaries, and insurance.