Which of the following statements is true ?
A) To maximize profits, a firm must maximize total revenue.
B) In long-run equilibrium, a competitive firm produces at the point of minimum average total cost.
C) In the short-run, a perfectly competitive firm produces where total cost is minimum.
D) In the short-run, a perfectly competitive firm will close down whenever price is less than average total cost.

Question

Quizplus · Accepted Answer

In the long-run equilibrium, a competitive firm produces at the point where its price equals minimum average total cost, which maximizes profits. Option A is incorrect because profit maximization occurs where marginal revenue equals marginal cost. Option C is incorrect because in the short-run a perfectly competitive firm produces where marginal cost equals marginal revenue. Option D is incorrect because a perfectly competitive firm will only shut down in the short-run if the price is less than the minimum average variable cost.

Which of the Following Statements Is True