Suppose that Pumice Motor Company has total revenue of $800,000, fixed costs of $200,000, and variable costs of $900,000. If Pumice Motor company is known to be in a perfectly competitive market, which of the following is true?

Question

Quizplus · Accepted Answer

Pumice Motor Company is experiencing a loss because its total costs ($200,000 fixed + $900,000 variable = $1,100,000) exceed its total revenue ($800,000). In a perfectly competitive market, firms experiencing losses will exit the market in the long run.

Suppose That Pumice Motor Company Has Total Revenue of $800,000