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If price is below average variable costs at all rates of output, the quantity supplied by a...

Question:

If price is below average variable costs at all rates of output, the quantity supplied by a perfectly competitive firm will equal:

A. the rate of output where price equals marginal cost.

B. the rate of output associated with the break-even point.

C. zero.

D. the rate of output where marginal revenue equals average fixed costs.

Variable Cost:

In economics, the variable cost is the expense that a firm incurs while producing its output for the market. This cost is directly related to the level of production. So, an increment in production causes the variable cost to increase, and vice versa.

Answer and Explanation: 1

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  • The correct option is C. Zero.

For each firm operating under the perfectly competitive market structure, when the price of the product is below the...

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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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