Hank operates a perfectly competitive firm in the long run.For several periods,the market price has been $20,and his break-even price is $22.Given the chance to change his fixed costs,Hank should:

Question

Quizplus · Accepted Answer

If the market price is consistently below Hank's break-even price, he is making losses in the long run. Therefore, he should seriously consider exiting the industry to avoid further losses. Being a perfectly competitive firm, Hank cannot influence the market price, and changing his fixed costs will not make a significant impact on his profitability. Waiting for the short-run period may not change the market conditions that are causing his losses.

Hank Operates a Perfectly Competitive Firm in the Long Run