Question

The Ajax Manufacturing Company is selling in a purely competitive market. Its output is 100 units, which sell at $4 each. At this level of output, total cost is $600, total fixed cost is $100, and marginal cost is $4. The firm should

		reduce output to about 80 units.
		produce zero units of output.
		continue to produce 100 units.
		expand its production.

A purely competitive seller should produce (rather than shut down) in the short run

		only if total cost exceeds total revenue.
		only if total revenue exceeds total cost.
		if total cost exceeds total revenue by some amount greater than total fixed cost.
		if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost.

Answer 1

actually be mentioned that the optimal quantity that has to be produced in a perfect competitive market is when the marginal cost is equal to the price and in this regard the marginal cost is $4 and the prices also $4 and therefore this is the profit maximizing quantity or loss minimising quantity and therefore the company should continue to produce at this level of output and in this regard

(c) continue to produce hundred units is answer to this question

Your competitive seller should produce only if the total when you is greater than the total variable cost or average revenue is greater than or equal to average variable cost because if the price is less than the average variable cost the firm will shut down.

TR > TVC

which implies TR > TC-TFC

which implies TC - TR > TFC

From the above derivation it can be observed that if the total cost exceeds the total revenue slightly greater amount than the total fixed cost then the firm will continue to produce and not shutdown and therefore in this regard it can be mentioned that

(c) total cost exceeds total revenue by some amount greater than total fixed cost is answer to this question