In the short run, a perfectly competitive profit maximizing firm that has not shut down:
A) is operating on the downward-sloping portion of its AVC curve.
B) is operating at the minimum of its AVC curve.
C) is operating on the upward-sloping portion of its AVC curve.
D) is not operating on its AVC curve.
E) can be at any point on its AVC curve.

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive profit-maximizing firm that has not shut down will be operating where marginal cost equals marginal revenue, which is typically on the upward-sloping portion of its average variable cost (AVC) curve. This is because the AVC curve typically slopes upwards after reaching its minimum point, reflecting increasing marginal costs as output increases.

In the Short Run, a Perfectly Competitive Profit Maximizing Firm