Asked by Carla Reyes on Jun 20, 2024
Verified
Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC.Given this,the firm:
A) minimizes losses by producing at the minimum point of its AVC curve.
B) maximizes profits by producing where MR = ATC.
C) should close down immediately.
D) should continue producing in the short run but leave the industry in the long run if the situation persists.
Minimum AVC Point
The level of output at which a firm's average variable cost (AVC) is minimized.
Purely Competitive
A market scenario where numerous producers and consumers participate, making the individual impact on price negligible.
Average Total Cost
The total cost of production divided by the number of units produced, representing the average cost per unit of goods or services produced.
- Comprehend the circumstances leading to economic gains and deficits in entirely competitive firms.
- Identify the differences in decision-making for the short run versus the long run in markets characterized by pure competition.
Verified Answer
Learning Objectives
- Comprehend the circumstances leading to economic gains and deficits in entirely competitive firms.
- Identify the differences in decision-making for the short run versus the long run in markets characterized by pure competition.
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