Asked by KALLA RAJU SRAVAN MS on May 31, 2024
Verified
A profit-maximizing firm continues to operate even though it is losing money.It sells its product at a price of $100.
A) Average total cost is less than $100.
B) Average fixed cost is less than $100.
C) Marginal cost is increasing.
D) Average variable cost is less than $100.
E) Marginal cost is decreasing.
Average Total Cost
The total cost of production divided by the number of goods produced, indicating the per unit cost of production.
Marginal Cost
The cost of producing one additional unit of a good or service.
- Assess the approach competitive firms take towards maximizing profits.
- Assess the significance of fixed and variable costs in shaping a firm's production and pricing strategies.
Verified Answer
BB
Brittany BurlisonJun 01, 2024
Final Answer :
D
Explanation :
If the firm is still operating even though it is losing money, it means that the price of its product ($100) is greater than its average variable cost. This would only be possible if option D is true, that is, the average variable cost is less than $100.
Learning Objectives
- Assess the approach competitive firms take towards maximizing profits.
- Assess the significance of fixed and variable costs in shaping a firm's production and pricing strategies.
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