At the short-run break-even price, the firm A) may be earning a positive or negative profit depending upon costs. B) may be earning a positive or negative profit depending upon costs. C) is earning negative profits. D) is making a normal rate of return on its capital investment.

At the short-run break-even price, the firm A) may be earning a positive or negative profit depending upon costs. B) may be earning a positive or negative profit depending upon costs. C) is earning negative profits. D) is making a normal rate of return on its capital investment.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter22: Getting Divisions To Work In The Firm’s Best Interests

Section: Chapter Questions

Problem 3MC

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Concept explainers

Cost of Production

In economic theory, production costs are the costs incurred by an industrial organization when it engineers a project or provides a service that generates revenue and benefits. Labor costs, raw materials, consumable manufacturing costs, and general overhead sum up, accounting for production costs. Total cost data is calculated by combining total direct costs of materials, labor costs, and total production costs.

Question

At the short-run break-even price, the firm

A) may be earning a positive or negative profit depending upon costs.

B) may be earning a positive or negative profit depending upon costs.

C) is earning negative profits.

D) is making a normal rate of return on its capital investment.

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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