Assume for a competitive firm that MC = AVC at $12, MC = ATC at $20, and MC = MR at $16. This firm will
A)realize a profit of $4 per unit of output.
B)maximize its profit by producing in the short run.
C)minimize its losses by producing in the short run.
D)shut down in the short run.

Question

Quizplus · Accepted Answer

The firm will minimize its losses by producing in the short run because the price ($16) is above the AVC ($12) but below the ATC ($20), meaning it can cover its variable costs and some fixed costs, reducing losses.

Assume for a Competitive Firm That MC = AVC at $12