If the Price of a Product Consistently Exceeds Its Average

question 27

Multiple Choice

If the price of a product consistently exceeds its average cost, one can definitely conclude that the firm:

• A) is earning a normal rate of return.
• B) is maximizing its long-run profit.
• C) is producing at its most efficient level of output.
• D) is earning a positive economic profit.
• E) is producing at the minimum efficient scale.

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Definitions:

Debits

An entry recorded on the left side of a double-entry bookkeeping system that increases asset and expense accounts, and decreases liability, equity, and revenue accounts.

Journal

A chronological record of all the financial transactions of a business, used for the process of accounting.

Indenting

The process of setting text inwards from the margin to separate sections or emphasize parts of a document.

Capital

Assets with monetary value, including cash and merchandise, that a company utilizes to produce revenue or increase its wealth.