Assume that in the short run a perfectly competitive firm does not produce output and has economic losses.This occurs at the quantity where MR = MC and:

Question

Quizplus · Accepted Answer

Economic losses occur when the firm's price is less than its average variable cost (P < AVC) and the firm is still incurring fixed costs (FC > 0). In the short run, the firm cannot exit the market and must continue to produce at a loss as long as its price is greater than its average variable cost. Therefore, the best choice is B.

Assume That in the Short Run a Perfectly Competitive Firm