In the short run a firm in a competitive market will produce nothing when:
A)price is less than SMC.
B)its maximum profit is negative.
C)price is less than the minimum value of SAVC.
D)STC exceeds total revenue.

Question

Quizplus · Accepted Answer

In the short run, a firm will produce nothing when the price is less than the minimum value of its short-run average variable cost (SAVC). This is because at this point, the firm is unable to cover its variable costs and it would be better off shutting down temporarily until the market conditions improve.

In the Short Run a Firm in a Competitive Market