-The above figure shows a perfectly competitive firm. If the market price is $15 per unit, the firm

Question

Quizplus · Accepted Answer

In a perfectly competitive market, if the market price is above the average variable cost but below the average total cost, the firm will continue to produce in the short run to cover some of its fixed costs, even though it incurs an economic loss. This is because shutting down would result in a higher loss equal to the total fixed costs. Since the price is $15, which is assumed to be between the average variable cost and average total cost, the firm will operate at a loss but will not shut down immediately.

-The Above Figure Shows a Perfectly Competitive Firm