Suppose that once a well is dug,water flows out of it continuously without any additional effort.Customers collect their water and pay a per gallon fee when they leave the site of the well.In the short run,the competitive firm in this market
A) has no variable costs.
B) has no fixed costs.
C) will shut down.
D) can produce water at no cost.

Question

Quizplus · Accepted Answer

In the short run, the competitive firm will have no variable costs because the water flows continuously without any additional effort. However, the firm may still have fixed costs, such as the cost of building the well or the cost of maintaining it. The firm will not shut down because it can collect revenue from customers who pay the per gallon fee. While it may seem that the firm can produce water at no cost, this is not entirely true as there are likely some fixed costs involved.

Suppose That Once a Well Is Dug,water Flows Out of It