T-Shirt Enterprises is selling in a purely competitive market.Its output is 300 units,which sell for $1 each.At this level of output,marginal cost is $1 and average variable cost is $1.50.The firm should:

Question

Quizplus · Accepted Answer

In a purely competitive market, if the price is less than the average variable cost, the firm should shut down in the short run. Here, the price ($1) is less than the average variable cost ($1.50), so the firm should produce zero units.

T-Shirt Enterprises Is Selling in a Purely Competitive Market