Use the following to answer question:
-(Table: Total Cost for a Perfectly Competitive Firm)Use Table: Total Cost for a Perfectly Competitive Firm.In the short run,the firm will produce,but at a loss,if the price is:

Question

Use the following to answer question: 
-(Table: Total Cost for a Perfectly Competitive Firm)Use Table: Total Cost for a Perfectly Competitive Firm.In the short run,the firm will produce,but at a loss,if the price is:

Quizplus · Accepted Answer

To determine if the firm will produce at a loss in the short run, we need to compare the price to the minimum point on the average variable cost curve (AVC). In this case, the minimum point occurs at a quantity of 3, where AVC is $3.33. If the price is less than $3.33, the firm will not be able to cover its variable costs and will shut down.

At a price of $2.00 or $2.50, the firm would definitely shut down because the price is below the minimum AVC.

At a price of $4.50 or higher, the firm would make a profit because the price is above the minimum point on the average total cost (ATC) curve.

The only remaining option is C) $3.50. At this price, the firm would be able to cover its variable costs and produce in the short run, but it would still operate at a loss because the price is below the minimum point on the ATC curve. Therefore, the best choice is C.

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