A purely competitive seller should produce (rather than shut down) in the short run
A) only if total revenue exceeds total cost.
B) only if total cost exceeds total revenue.
C) if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost.
D) if total cost exceeds total revenue by some amount greater than total fixed cost.

Question

Quizplus · Accepted Answer

In the short run, a purely competitive seller should produce if the total revenue exceeds total variable cost, regardless of whether total cost exceeds total revenue. If total cost exceeds total revenue, but revenue still covers variable cost and contributes towards fixed cost, the seller should continue production in the short run. Therefore, option C is the correct choice as it includes both scenarios where the seller should produce in the short run.

A Purely Competitive Seller Should Produce (Rather Than Shut Down)