A purely competitive seller should produce (rather than shut down)in the short run
A)only if total revenue exceeds total cost.
B)only if total cost exceeds total revenue.
C)if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost.
D)if total cost exceeds total revenue by some amount greater than total fixed cost.

Question

Quizplus · Accepted Answer

A purely competitive seller should continue to produce in the short run as long as they can cover their variable costs, even if they are not covering their total costs. This is because, in the short run, fixed costs are sunk and cannot be recovered by shutting down. Therefore, as long as the revenue covers the variable costs (even if total revenue is less than total cost, but the loss is less than the total fixed cost), it makes sense to keep producing. This helps in minimizing losses that would otherwise be equal to the total fixed costs if the firm shuts down.

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