If a Competitive Firm Is Currently Producing a Level of Output

question 86

Multiple Choice

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

• A)average revenue exceeds marginal cost.
• B)the firm is earning a positive profit.
• C)decreasing output would increase the firm's profit.
• D)All of the above are correct.

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Definitions:

Average Actual Selling Price

The mean price at which goods or services have been sold, calculated over a specific period or volume of sales.

Spending Variance

The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost. A favorable (unfavorable) spending variance occurs because the cost is lower (higher) than expected, given the actual level of activity for the period.

Static Planning Budget

A budget based on a fixed level of activity that does not change with actual levels of output, sales, or other activity measures.

Controlled Costs

Costs that can be influenced or managed by decisions made by managers or company officials.