Which of the following is not a valid generalization concerning the relationship between price and costs for a purely competitive seller in the short run?
A)Price must be at least equal to average total cost.
B)Price times quantity produced must be equal to or greater than total variable cost for some level of output or the firm will close down in the short run.
C)Price may be equal to, greater than, or less than average total cost.
D)Price must be equal to or greater than minimum average variable cost for the firm to continue producing.

Question

Quizplus · Accepted Answer

In a purely competitive market in the short run, price does not have to be at least equal to average total cost for a firm to operate. Firms may operate at a loss, where price is less than average total cost, as long as the price covers the average variable cost.

Which of the Following Is Not a Valid Generalization Concerning