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
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- 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...
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Perfectly Competitive Market: Definition, Characteristics & Examples
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Chapter 3 / Lesson 63
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Learn the definition of perfect competition and understand how a perfectly competitive market works. Study the characteristics of a perfectly competitive market with examples.
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