Why would a firm decide to produce a positive quantity of a output even though it...

Why would a firm decide to produce a positive quantity of a output even though it makes negative profits by doing so?

Because the price is high enough to cover the average fixed cost.

Because the price is high enough to cover the average total cost.

Because the price is high enough to cover the average variable cost.

A firm would never produce when profit is negative.

Solutions

Expert Solution

Option c

Because the price is high enough to cover the average variable cost

A firm produces even in losses to minimize loss if the price is AVC<P<ATC.

If the firm shut down the loss is equal to fixed cost

the firm produces the loss is equal to =FC-(P-AVC)*Q.

The loss decreases if the firm produces because it can cover variable costs and some of the fixed costs.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Suppose that in order to produce any positive amount of output, a firm must build an...

Suppose that in order to produce any positive amount of output, a firm must build an operating facility which costs $40. The Variable Cost of production is equal to 6q, where q is the quantity of output. Therefore the Marginal Cost of production is constant at MC = $6. If the firm decides not to produce, it does not build the operating facility, and so it incurs 0 costs. The demand facing the firm is given by P = 20...

Why do KCL and CaCl2 produce different flame colors even though K+ and Ca+2 are isoelectronic?

Why would T-bonds be an attractive investment, post 2008, even though they had such miserably low...

Why would T-bonds be an attractive investment, post 2008, even though they had such miserably low rates?

The CPA-auditor is required to be INDEPENDENT (even though the accounting firm is paid by the...

The CPA-auditor is required to be INDEPENDENT (even though the accounting firm is paid by the corporation). In contrast, the CPA-tax accountant (or attorney) is an ADVOCATE of the client (not a spokesperson for the IRS). Please discuss the legal, ethical, and pragmatic distinctions between these two conflicting positions. Support your comments using Circular 230 and the AICPA Code of Professional Conduct.

If the firm was regulated to produce at the socially optimal output

If the firm was regulated to produce at the socially optimal output ( producer’s surplus is at its maximum), how much would the firm produce?

why are the symptoms of adrenal and pituitary Cushing's the same, even though the cause of...

why are the symptoms of adrenal and pituitary Cushing's the same, even though the cause of it are different? Based on the symptoms of Cushing's, explain whether or not its actions are anabolic or catabolic.? The dexamethasone suppression test is used to determine if Cushing's is pituitary based. Explain why cortisol should remain elevated in those with secondary pathology

a.a mother and father produce a son with hemophilia even though neither have the disease themselves....

a.a mother and father produce a son with hemophilia even though neither have the disease themselves. If this son has children with a woman who is carrier of the disease, what is the chance of having a son who has the disease and what is the chance of having a daughter with the disease? Briefly explain your answer. b. a father with a sister who has Tay Sachs has a son and daughter with a woman who also has a...

Question