In a perfectly competitive market, the market price is $2, and firms are producing 100 units. At a quantity of 100 units, average total cost is $4, and average variable cost is $3. In the short run, firms will:

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In the short run, firms will shut down if the price is below the average variable cost. Since the market price ($2) is below the average variable cost ($3), firms will shut down. Exiting the market is a long-term decision, not a short-term one like shutting down. The price remaining at $2 is a separate issue and depends on market conditions and demand.

In a Perfectly Competitive Market, the Market Price Is $2