A perfectly competitive firm is currently producing at a point where price is $10 and both marginal cost and average variable cost are $7.To maximize profit or minimize loss in the short run,this firm should _____

Question

Quizplus · Accepted Answer

In the short run, a perfectly competitive firm should produce where marginal cost equals price to maximize profits. In this case, since the marginal cost is less than the price, the firm can increase its output to maximize profit. Therefore, the firm should increase its output to minimize its losses in the short run.

A Perfectly Competitive Firm Is Currently Producing at a Point