If a perfectly competitive firm finds that price is less than average variable cost, it should: shut down immediately. increase output until price equals marginal cost. decrease output until price equals marginal cost. not adjust output if marginal cost equals price.

Question

Business

Jamari Bush

18 December, 05:04

If a perfectly competitive firm finds that price is less than average variable cost, it should: shut down immediately. increase output until price equals marginal cost. decrease output until price equals marginal cost. not adjust output if marginal cost equals price.

+1

Answers (1)

Know the Answer?

Laurel Boyer · Answer 1

Answer: It should shot down immediately.

Explanation:

If the market price is equal to average cost at the profit-maximizing level of output, then the firm is making zero profits. If the market price that a perfectly competitive firm faces is below average variable cost at the profit-maximizing quantity of output, then the firm should shut down operations immediately.