Scenario 14-2 Assume a Certain Firm Is Producing Q = 1,000 Units

question 241

Multiple Choice

Scenario 14-2
Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $20 and its average total cost equals $25. The firm sells its output for $30 per unit.
-Refer to Scenario 14-2. To maximize its profit, the firm should

• A)increase its output.
• B)continue to produce 1,000 units.
• C)decrease its output but continue to produce.
• D)shut down.

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Definitions:

Call Option

A financial contract giving the option buyer the right, but not the obligation, to buy a specified amount of an underlying asset at a set price within a specified time.

Historical Rate

An exchange rate used for converting transactions that have already occurred, based on the rate in effect at the time of the transaction.

Spot Rate

The current market price used for immediate delivery of a currency, commodity, or financial instrument.

Closing Rate

The exchange rate at the balance sheet date, used to convert the financial statements of a foreign subsidiary to the parent company's presentation currency.