At the Level of Output Where Marginal Revenue Equals Marginal

question 20

Multiple Choice

At the level of output where marginal revenue equals marginal cost, price is less than average total cost but greater than average variable cost.In this instance, a profit-maximizing firm should:

• A)cease production as it is incurring an economic loss.
• B)continue operating at that output level in the short term, since total revenue will cover all of the firm's variable costs and some of its fixed costs.
• C)continue operating at that output level in the short term, since total revenue will cover all of the firm's fixed costs and a portion of its variable costs.
• D)decrease output to where marginal revenue exceeds marginal cost by the greatest dollar amount.
• E)increase the production of output.

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Definitions:

Current Liability

This represents a company's debts or obligations that are expected to be paid off within a year, including accounts payable, short-term loans, and accrued expenses.

Long Term

Refers to assets, liabilities, or investments that are expected to last or be in use for a period longer than one year.

Noncurrent Debt

A liability not requiring payment within the current fiscal year, typically extending beyond one year.

Refinancing

The process of replacing an existing loan with a new loan that usually has better terms, such as a lower interest rate.