-The figure above shows Mollie's Mugs' costs of producing mugs. The mug market is perfectly competitive. If the market price of a mug falls to $5 and Mollie's shuts down temporarily, its total variable cost is _______ per day and it incurs an economic loss of _______ per day.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, if Mollie's Mugs shuts down temporarily, it will not incur any variable costs because it is not producing any mugs, making its total variable cost $0 per day. However, it will still incur its fixed costs, which are its economic losses in this scenario. The question does not provide the exact fixed costs, but given the options, the only plausible economic loss without variable costs is $120 per day, as indicated in option C.

-The Figure Above Shows Mollie's Mugs' Costs of Producing Mugs