Suppose a perfectly competitive firm faces the following situation: P = $10; output = 3,000; ATC = $8.50; MC = $9; and AVC = $7.50. Which statement is an accurate description of the firm's situation?
A) The firm incurs a loss and is minimizing its loss.
B) The firm earns profit but should increase output to maximize its profit.
C) The firm is maximizing profit.
D) The firm earns profit but should decrease output to maximize its profit.
Correct Answer:
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