If a Profit-Maximizing Firm Finds That Price Exceeds Average Variable

question 161

Multiple Choice

If a profit-maximizing firm finds that price exceeds average variable cost and marginal cost is greater than marginal revenue,it should:

• A) reduce output, but continue producing in the short run.
• B) increase output.
• C) shut down.
• D) not alter its production level since it is earning a profit.

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Definitions:

Sample Mean

The average value obtained from a sample, used as an estimate of the population mean.

Population Standard Deviation

A measure of the dispersion or spread of all the data points in a population from its mean value.

Central Limit Theorem

A statistical theory stating that the distribution of sample means approximates a normal distribution as the sample size becomes larger, assuming all samples are identical in size, regardless of the population's distribution.

Discrete Distribution

A type of probability distribution where the variable can take on a countable number of distinct values.