If AVC Is $6 When P = MC, a Firm

question 383

Multiple Choice

If AVC is $6 when P = MC, a firm

• A) will have positive economic profits if price is greater than $6.
• B) is producing too little output.
• C) should shut down if price is less than $6.
• D) is experiencing economies of scale.

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Definitions:

Market Value

The ongoing market rate for buying or selling a product or service in the open market environment.

Discounted Free Cash Flow Approach

A valuation method that estimates the value of an investment based on its expected future cash flows, discounted back to their present value.

Free Cash Flows

The amount of cash generated by a business after accounting for capital expenditures, available for distribution among all the securities holders of an entity.

Discontinued Operations

A component of a business that has been disposed of, or is classified as held for sale, and represents a separate major line of business or geographical area of operations.