A Profit-Maximizing Firm Should Shut Down in the Short Run

question 23

Multiple Choice

A profit-maximizing firm should shut down in the short run if:

• A) price is greater than marginal cost.
• B) total revenue is less than total variable cost.
• C) the firm is earning less than a normal rate of return.
• D) the firm is not able to cover its overhead expenses.
• E) marginal cost is higher than average cost.

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Definitions:

Service Business

A type of business that primarily offers intangible goods or services to consumers, such as consulting, legal advice, and maintenance services.

Merchandising Business

A type of business that makes profit by buying goods at a wholesale price and selling them at a retail price, primarily dealing in goods rather than services.

Financial Statements

Financial statements are records that provide an overview of a company's financial performance and position, typically including the balance sheet, income statement, and statement of cash flows.

Purchases Returns and Allowances

From the buyer’s perspective, returned merchandise or an adjustment for defective merchandise.