Which of the following statements about a firm in a perfectly competitive industry is true?
A)The firm can improve its competitive position and sell more output by advertising its product.
B)The firm maximizes its profit by producing where P = ATC.
C)The firm maximizes its profit by producing where P = AVC.
D)The firm will not produce at all if P

Question

Which of the following statements about a firm in a perfectly competitive industry is true?
A)The firm can improve its competitive position and sell more output by advertising its product.
B)The firm maximizes its profit by producing where P = ATC.
C)The firm maximizes its profit by producing where P = AVC.
D)The firm will not produce at all if P < ATC.
E)The firm will not produce at all if P < the minimum of AVC.

Quizplus · Accepted Answer

In a perfectly competitive market, a firm will not produce if the price is below the minimum of the average variable cost (AVC), as it would not be able to cover its variable costs.

Which of the Following Statements About a Firm in a Perfectly