The figure below shows the price, marginal cost, and average cost curves of a perfectly competitive firm.
FIGURE 8-5
-Refer to Figure 8-5. What action should the firm take?
A) They should keep operating temporarily in order to minimize losses, since price exceeds average total cost.
B) They should keep operating temporarily in order to minimize losses, since price exceeds average variable cost.
C) They should shut down in order to minimize losses.
D) They should decrease output to 30 units, since marginal revenue exceeds marginal cost by the greatest dollar amount at that level of output.
Correct Answer:
Verified
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