A Firm Should Not Necessarily Shut Down If

question 127

Multiple Choice

A firm should not necessarily shut down if:

• A)total revenue is less than total variable cost.
• B)losses are greater than fixed costs.
• C)the demand curve facing the firm lies below its average variable cost curve.
• D)price is less than average variable cost.
• E)losses exceed variable costs.

Understand the concept of loss aversion and how it influences investment decisions.

Interpret the significance of price levels and consumer response to perceived price fairness or gouging.

Recognize the role of emphasizing features of goods and services in microeconomic theory.

Grasp the influence of behavioral economics on decision-making based on perceived fairness.

---

Definitions:

Economies of Scope

Economies of scope occur when it is more cost-effective for a company to produce two or more products together rather than separately.

Cost of Producing

The total expenditure incurred in manufacturing a product or providing a service, including materials, labor, and overheads.

Economies of Scope

Cost advantages that a business obtains through the diversification of its production by producing multiple products from joint inputs.

Economies of Scale

Businesses gain financial benefits from their size of operation, as the cost for each unit of output typically reduces with the expansion of scale.