A perfectly competitive firm will not produce any output in the short run and will shut down if price is:

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive firm will shut down if the price is less than the average variable cost because it cannot cover its variable costs. This is because in the short run, the firm cannot adjust its fixed costs, so it only considers whether it can cover its variable costs to continue operating. If the price is less than the average variable cost, the firm will not be able to cover its variable costs and will shut down. Therefore, the correct answer is C - less than average variable cost.

A Perfectly Competitive Firm Will Not Produce Any Output in the Short