In the short run,a competitive firm will
A) Will produce a quantity where AC = MR.
B) Will produce a quantity where AVC = MR.
C) Will produce a quantity where MC = MR.
D) Will shut down if price falls below the minimum of average costs.

Question

Quizplus · Accepted Answer

In the short run, a competitive firm will want to maximize profits, which occurs at the quantity where marginal revenue (MR) is equal to marginal cost (MC). Therefore, the firm will produce a quantity where MC=MR. Option A and B are not always true as they do not take into account fixed costs, which can affect the minimum of average costs. Option D is not always true as the firm may still choose to produce as long as the price is above the minimum of average variable cost.

In the Short Run,a Competitive Firm Will