In the short run, a perfectly competitive firm will always shut down if, at all positive output levels, total revenue is

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive firm will always compare the price it receives for its good with its variable cost per unit. If the price is less than the variable cost per unit, the firm will not be able to cover its variable expenses and it will end up losing more money the more it produces. Therefore, the firm will shut down and produce zero output. This means that total revenue will be less than variable cost, which is the minimum amount required to cover the variable expenses of production. Thus, the correct answer is E) less than variable cost.

In the Short Run, a Perfectly Competitive Firm Will Always