Asked by
Huang Allen
on Dec 11, 2024
Verified
If price is above average variable cost and below average total cost, a profit-maximizing price taker should
A) immediately shut down; failing to do so is contrary to the idea of profit maximization in a competitive market.
B) continue producing as long as it expects the market price to rise above average total cost in the near future.
C) attempt to push price upward by slowly reducing output.
D) cut price so more units can be sold.
Average Variable Cost
The total variable cost per unit of output, calculated by dividing total variable costs by the quantity of output produced.
Average Total Cost
The total cost of production (fixed and variable costs combined) divided by the number of units produced, expressed on a per unit basis.
- Determine the circumstances in which a business ought to maintain, decrease, or halt manufacturing in the short-term perspective.
- Comprehend the connection between a company's average variable cost, average total cost, and the market price when making operational decisions.
Verified Answer
NG
Learning Objectives
- Determine the circumstances in which a business ought to maintain, decrease, or halt manufacturing in the short-term perspective.
- Comprehend the connection between a company's average variable cost, average total cost, and the market price when making operational decisions.