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.
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
- 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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fromChapter 3 / Lesson 63
Learn the definition of perfect competition and understand how a perfectly competitive market works. Study the characteristics of a perfectly competitive market with examples.