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 continue to produce in the short run as long as its total revenue is enough to cover its total variable costs, even if it's not covering its total fixed costs. This is because, in the short run, fixed costs are sunk and unavoidable, whereas variable costs are incurred with each unit of production. If the firm can cover its variable costs, it can contribute to fixed costs and potentially minimize losses.

A Purely Competitive Firm Should Produce in the Short Run