At its present rate of output, 200 units, a perfectly competitive firm has variable costs of $10, 000 and marginal cost of $50, and accepts the market price of $40 per unit.To improve its profit/loss situation, this firm should

Question

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Since the market price is lower than the marginal cost, the firm is incurring losses. Therefore, it should minimize its losses by shutting down production in the short run. The fixed costs would still need to be paid, but by shutting down, the firm would avoid incurring any additional variable costs.

At Its Present Rate of Output, 200 Units, a Perfectly