When Determining Whether to Shut Down in the Short Run

question 94

Multiple Choice

When determining whether to shut down in the short run, a competitive firm should ignore i) fixed costs.
Ii) variable costs.
Iii) sunk costs.

• A) iii) only
• B) i) and iii) only
• C) ii) only
• D) i), ii), and iii)

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Definitions:

Average Revenue

The amount of money a company makes for each unit of product sold, which is found by dividing the overall revenue by the number of units sold.

Competitive Market

A market structure characterized by a large number of buyers and sellers, where each has a negligible impact on market price.

Marginal Revenue

The additional income that will be generated by increasing product sales by one unit.

Quantity Demanded

The amount of a good or service that consumers are willing to purchase at a given price at a specific time.