The perfectly competitive firm should produce in the a. short run if price is below average...

The perfectly competitive firm should produce in the

a. short run if price is below average variable cost.
b. long run if price is below average variable cost.
c. short run if price is below average total cost but above average variable cost. d. long run if price is below average total cost but above average variable cost.

d. long run if price is below average total cost but above average variable cost.

Expert Solution

A perfectly competitive firm should shutdown their production if price is less than the average variable cost(AVC) in short run.

But perfectly competitive firm will produce in short run if price is above the average variable cost (AVC) but below average total cost (ATC).

In long run perfectly competitive firm will produce if price is above the average total cost (ATC).

Answer: option (c).

Rahul Sunny answered 2 years ago

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