If a Firm's Average Total Cost Is Less Than Price

question 78

Multiple Choice

If a firm's average total cost is less than price where MR = MC

• A)the firm should shut down.
• B)the firm should raise its price.
• C)the firm should continue to produce the output it is producing.
• D)the firm should cut back on its output to lower its cost.

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Definitions:

Economic Order Quantity

The optimal quantity of inventory to order that minimizes total inventory costs, including holding, ordering, and shortage costs.

Carrying Cost

The total expense of holding a particular asset over time, including storage, insurance, and taxes, but excluding buying cost.

Order Cost

Expenses incurred in placing and receiving orders from suppliers, including costs related to processing, shipping, and handling.

Economic Order Quantity

The ideal order size to minimize total inventory costs including ordering, carrying, and stockout costs.