When a profit-maximizing firm's fixed costs are considered sunk in the short run, then the firm
A)can set price above marginal cost.
B)must set price below average total cost.
C)will never show losses.
D)can safely ignore fixed costs when deciding how much output to produce.

Question

Quizplus · Accepted Answer

In the short run, fixed costs are considered sunk and do not affect the firm's decision on how much output to produce. The firm focuses on covering variable costs and maximizing profit based on marginal costs and revenues.

When a Profit-Maximizing Firm's Fixed Costs Are Considered Sunk in the Short