A perfectly competitive firm is producing a good at a level where P = $30 and MC = $30. The firm will continue to produce in the short run as long as

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive firm will continue to produce as long as the price is greater than or equal to the AVC (average variable cost) of production. In this case, the firm is producing at a level where P = MC = $30, so it is covering its variable costs. As long as the AVC is less than $30, the firm will continue to produce in the short run and minimize its losses. Therefore, the correct choice is A, that is, AVC is less than $30.

A Perfectly Competitive Firm Is Producing a Good at a Level