If average variable cost exceeds price for a perfectly competitive firm in the short run,then it could increase profits by raising its price.

Question

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If a perfectly competitive firm's average variable cost exceeds the price, it means that the firm is incurring losses in the short run. In this situation, increasing the price will not help the firm increase profits because it will lead to a decrease in demand and, as a result, a lower quantity sold. Therefore, the firm should either lower its costs or exit the market in the long run.

If Average Variable Cost Exceeds Price for a Perfectly Competitive