Is the following statement true or false? Explain your answer fully. If you use terms that...

Is the following statement true or false? Explain your answer fully. If you use terms that someone who has never taken an economics course may be unfamiliar with, please define them and use them correctly. That is part of your grade.

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the price is greater than average variable cost.

Expert Solution

This is statement is true

In the short run the prices should be at least equal to the minimum average variable cost so that the firm is indifferent between producing and not producing. Price greater than the minimum of average variable cost will allow the firm to operate because it is now covering its variable cost and some portion of its fixed cost. The marginal cost function is used as the supply curve to determined what level of output should be produced at the given price.

Rahul Sunny answered 2 years ago

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