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Q. |
If a perfectly competitive firm finds that the profit maximizing output level occurs where price is equal to marginal cost but is less than average variable cost |
A. | the firm will continue to operate in the short run since total revenue exceeds total variable cost but will exit the industry in the long run |
B. | the firm will continue to operate in the short run since it has to pay the total fixed cost whether or not it continues to operate |
C. | the firm will increase its selling price to raise revenue in order to be able to continue to operate profitably in the short run |
D. | the firm will shut down in the short run and exit the industry in the long run if it does not foresee market conditions changing |
Answer» D. the firm will shut down in the short run and exit the industry in the long run if it does not foresee market conditions changing |
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