Table 6.1
-Table 6.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $3

Question

Quizplus · Accepted Answer

At a market price of $3, the firm's total revenue would be $3 x 3 = $9. However, its total variable cost at the profit-maximizing output level of 2 units would be $4, which is greater than the total revenue. Therefore, the firm would suffer a loss of $5. Since the firm's fixed cost is $6, its total cost would be $10, which is greater than its total revenue. As a result, the firm would be better off shutting down in the short run to minimize its losses.

Table 6.1 -Table 6.1 Shows the Cost Structure of a Firm in Firm