A perfectly competitive firm will not produce any output in the short run and will shut down if...

Question:

A perfectly competitive firm will not produce any output in the short run and will shut down if price is:

a. greater than marginal cost.

b. less than marginal cost.

c. less than average variable cost.

d. greater than average variable cost and less than average total cost.

Shutdown Point:

In microeconomics, the shutdown point is the point at which a firm will cease producing in the short-run because it cannot produce enough revenue to cover its short-run costs. When this happens, the firm is better off producing zero output than when producing a positive output.

Answer and Explanation: 1

Become a Study.com member to unlock this answer!

View this answer


  • The correct answer is: c. less than average variable cost.

For a perfectly competitive firm, the shutdown point is at the point where P=MC=AVC. That...

See full answer below.


Learn more about this topic:

Loading...
Perfectly Competitive Market: Definition, Characteristics & Examples

from

Chapter 3 / Lesson 63
43K

Learn the definition of perfect competition and understand how a perfectly competitive market works. Study the characteristics of a perfectly competitive market with examples.


Related to this Question

Explore our homework questions and answers library