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.

Solutions

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 1 year ago

Next > < Previous

Related Solutions

A firm in a perfectly competitive market will produce no output in the short run if the price is below $20 but will produce if the price is above $20.

A firm in a perfectly competitive market will produce no output in the short run if the price is below $20 but will produce if the price is above $20. The smallest quantity they will produce in the short run is 6. Firms will earn 0 economic profit if the price is $447.5 and its profit maximizing quantity is 21 at that price. The firm’s fixed cost is $6615. Assume the good can be produced in continuous quantities.Draw a picture...

QUESTION 11 In the short-run, if a perfectly competitive firm is producing at a price below...

QUESTION 11 In the short-run, if a perfectly competitive firm is producing at a price below average total cost, its economic profit is positive. zero. negative. positive, zero, or negative. QUESTION 12 Assume that a firm's marginal revenue barely exceeds marginal cost. To maximize profit, teh firm should: expand output. contract output. maintain output. there is insufficient information to answer the question. QUESTION 13 In the short run, a perfectly competitive firm will stay in business as long as: Price...

In the short run, a perfectly competitive firm will shut down and produce nothing if: a....

In the short run, a perfectly competitive firm will shut down and produce nothing if: a. economic profits equal zero. b. total cost exceeds total revenue. c. total variable cost exceeds total revenue. d. the market price falls below the minimum average total cost.

A perfectly competitive firm is making losses in the short-run. Will the market price rise or...

A perfectly competitive firm is making losses in the short-run. Will the market price rise or fall in the long-run? Explain your answer.

Explain why a perfectly competitive firm will shut down in the short run if price is...

Explain why a perfectly competitive firm will shut down in the short run if price is lower than average variable cost but will continue to produce if price is below average total cost but above average variable cost. In long-run competitive equilibrium, P = MC = SRATC = LRATC. Because P = MR, we can write the preceding condition as P = MR = MC = SRATC = LRATC. The condition thus consists of four parts: (a) P = MR,...

The short-run supply curve for a firm in a perfectly competitive industry is: The short-run marginal...

The short-run supply curve for a firm in a perfectly competitive industry is: The short-run marginal cost curve that is above minimum average variable cost (which takes into account the fact that the firm should shut down if price falls below average variable cost). The entire average variable cost. The entire short-run marginal cost curve. The entire average total cost curve. Which of the following statements is true regarding short-run and long-run costs? (Assume all cost curves have typical shapes,...

In long run equilibrium for a perfectly competitive firm; the firm will produce where A. Marginal...

In long run equilibrium for a perfectly competitive firm; the firm will produce where A. Marginal cost is at a minimum B. Average fixed cost is at a minimum C. Average variable cost is at a minimum D. Average total cost is at a minimum Height of a marginal product product curve shows: A. the additional cost of producing one more unit of a good B. the additional production from producing one more unit of the good. C. the additional...

At a price of $10, and assuming the price doesn't increase in the future, should the firm continue to produce in the short-run or shut down in the short-run?

Quantity Total Revenue Marginal Revenue Total Cost Marginal Cost Fixed Costs ATC Average Fixed Costs Average Variable Costs 0 0 - 10 - 10 - - - 1 8 24 14 24 2 16 34 10 17 3 24 42 8 14 4 32 49 7 12.25 5 40 57 8 11.4 6 48 67 10 11.17 7 56 81 14 11.57 8 64 99 18 12.38 9 72 123 24 13.67 At a price of $10, and assuming the...

1. a. Consider a perfectly competitive firm in the short run. On a diagram, draw the...

1. a. Consider a perfectly competitive firm in the short run. On a diagram, draw the firm's average cost, average variable cost, and marginal cost curves. Briefly discuss the relationship among these curves. b. On your diagram, show how the profit maximizing level of output is determined for this firm, given a market price. Show the firm making a positive profit. c. On your diagram, show total revenue, total cost and profits associated with the production level from part b....

Explain why the long-run product price for a perfectly competitive firm will equal its minimum average...

Explain why the long-run product price for a perfectly competitive firm will equal its minimum average total cost?

Subjects