In the short- run, a competitive firm will produce some output even though its profit is negative if:
A)price exceeds the minimum value of SAVC.
B)price exceeds the minimum value of SMC.
C)it expects prices to increase enough to earn positive profits soon.
D)price exceeds the minimum value of SATC.

Question

Quizplus · Accepted Answer

A competitive firm will produce some output as long as price is greater than or equal to the minimum value of its short-run average variable cost (SAVC). This is because the firm can cover its variable costs and contribute to some of its fixed costs, even if it is making negative profits.

In the Short- Run, a Competitive Firm Will Produce Some