A perfectly competitive firm finds that its selling price is $17, its ATC is $18, and its AVC is $16. What should the firm do?

Name: A perfectly competitive firm finds that its selling price is $17, its ATC is $18, and its AVC is $16. What should the firm do?
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Question

Quizplus · Accepted Answer

The firm should continue to produce because the price ($17) is greater than the AVC ($16), meaning it can cover its variable costs and contribute to fixed costs, minimizing losses compared to shutting down.

A Perfectly Competitive Firm Finds That Its Selling Price Is