In the short run, a perfectly competitive ball bearing manufacturer will continue to produce at a loss if

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive firm will continue to produce as long as it is covering its variable cost, even if it is not covering its fixed cost. This is because its fixed cost is sunk in the short run and cannot be recovered, so the firm would be better off producing and minimizing its loss by covering as much of its variable cost as possible. Option A is incorrect because covering all fixed cost may not be possible at the current level of production. Option C is incorrect because it is comparing two different costs and not addressing the question of whether the firm is covering its total cost. Option D is incorrect because having zero fixed cost would mean that the firm is in a very different situation than a typical firm and is not relevant to the question. Option E is incorrect because minimizing fixed cost is not relevant to the question of whether the firm is covering its total cost.

In the Short Run, a Perfectly Competitive Ball Bearing Manufacturer