When a firm reduces the level of output it produces, it can reduce: its average fixed and average variable costs. its variable costs but not its fixed costs. O its fixed costs but not its variable costs. its marginal revenue but not its average revenue

When a firm reduces the level of output it produces, it can reduce: its average fixed and average variable costs. its variable costs but not its fixed costs. O its fixed costs but not its variable costs. its marginal revenue but not its average revenue

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

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.7IP

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Concept explainers

Profit Maximization

Economic activity is related to the use of scarce resources of the economy that are used for producing goods and services which are required to satisfy various demands of the people. In other words, it can be said that it is all about satisfying the unlimited demands of individuals with the limited resources available. The production decision is taken by the producers or the firms. In economics, the terms ‘producers’, ‘suppliers’, and ‘firms’ are interchangeable. Now the question arises, what does a firm actually mean?

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When a firm reduces the level of output it produces, it can reduce:
its average fixed and average variable costs.
its variable costs but not its fixed costs.
its fixed costs but not its variable costs.
its marginal revenue but not its average revenue

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