Figure 5.1 Cost and Demand Conditions of a Perfectly Competitive Firm

-Refer to Figure 5.1. If the firm's price falls to $20, it will
A) shut down
B) produce 20 units and realize a loss
C) produce 50 units and break even
D) produce 60 units and realize a profit

Question

Figure 5.1 Cost and Demand Conditions of a Perfectly Competitive Firm
 
-Refer to Figure 5.1. If the firm's price falls to $20, it will
A) shut down 
B) produce 20 units and realize a loss 
C) produce 50 units and break even 
D) produce 60 units and realize a profit

Quizplus · Accepted Answer

The firm will shut down if the price falls to $20 because it will be unable to cover its variable costs.

Figure 51 Cost and Demand Conditions of a Perfectly Competitive Firm