If a perfectly competitive firm is faced with average revenue below average variable cost it will produce zero output so as to reduce its
A)costs to below its revenue.
B)costs to zero.
C)losses to the amount of its fixed costs.
D)losses to the amount of its variable costs.
E)losses to the amount of its marginal costs.

Question

Quizplus · Accepted Answer

If average revenue is below average variable cost, the firm cannot cover its variable costs and will minimize losses by shutting down, incurring only fixed costs.

If a Perfectly Competitive Firm Is Faced with Average Revenue