If a perfectly competitive firm can sell a bushel of soybeans for $25, has an average variable cost of $26 per bushel, and has a marginal cost of $26 per bushel, the profit-maximizing firm should

Question

Quizplus · Accepted Answer

Since the price at which the firm can sell soybeans ($25) is less than both the average variable cost ($26) and the marginal cost ($26) per bushel, the firm is not covering its variable costs and cannot profit by producing any output. In the short run, the profit-maximizing decision is to cut output to zero to minimize losses.

If a Perfectly Competitive Firm Can Sell a Bushel of Soybeans