A firm in a perfectly competitive industry
A) will maximize its profit by producing where P = ATC.
B) will not produce at all if P

Question

A firm in a perfectly competitive industry
A) will maximize its profit by producing where P = ATC.
B) will not produce at all if P < the minimum of AVC.
C) can improve its competitive position and sell more output by advertising its product.
D) will not produce at all if P < ATC.
E) will maximize its profit by producing where P = AVC.

Quizplus · Accepted Answer

In a perfectly competitive market, a firm will not produce if the price (P) is less than the minimum of average variable cost (AVC), as it would not be able to cover its variable costs and would incur losses.

A Firm in a Perfectly Competitive Industry