A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its
A) total variable costs.
B) total costs.
C) total fixed costs.
D) marginal costs.

Question

Quizplus · Accepted Answer

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its total variable costs. This is because in the short run, fixed costs cannot be changed and must be paid regardless of whether the firm produces or not. However, variable costs can vary with the level of production. If total revenue is less than total variable costs, the firm will incur losses and it is better for it to shut down temporarily and save on variable costs. Therefore, the best choice is A.

A Purely Competitive Firm Should Produce in the Short Run