Question 15 1 p Consider the perfectly competitive firm described by the short r

Question

Question 15 1 p Consider the perfectly competitive firm described by the short run cost curves in the figure below. g 20 MC ATC AVC 18 2 16 8 14 O 12 10 0 5 10 15 20 25 30 35 40 45 50 Quantity (mugs per day) If the price of the firm's output is $10. what will the firm choose to do in the short-run and why? shut down because the firm incurs an economic loss O stay in business and operate (produce a nonzero amount of output) because the firm's economic loss is less than its fixed cost O stay in business and operate (produce a nonzero amount of output) because the hrm is making an economic profit O stay in business and operate (produce a nonzero amount of output) because it is earning a normal profit

Explanation / Answer

The correct answer is: b)

Reason: the price is more than the AVC but less than AC, so the firm should operate and stay in business as the firm can cover at least a part of its fixed cost.

Thanks!

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.