Figure 7-F
The figure shows the price, marginal cost, and average cost curves of a perfectly competitive firm.
-Refer to Figure 7-F.The firm depicted above should:

Question

Figure 7-F
The figure shows the price, marginal cost, and average cost curves of a perfectly competitive firm. 
-Refer to Figure 7-F.The firm depicted above should:

Quizplus · Accepted Answer

In the short run, the firm should continue to operate as long as the price exceeds the average variable cost (AVC) at the profit maximization output. In this case, the price exceeds the AVC at all levels of output, but the price is below the average total cost (ATC) at all levels of output. Therefore, the firm will incur losses in the short run but should continue to operate to minimize these losses. Shutting down would result in a loss equal to the fixed costs, which is greater than the loss incurred by continuing to operate. Decreasing output to 30 units would not minimize losses, as the marginal revenue is less than the marginal cost at that level of output.

Figure 7-F The Figure Shows the Price, Marginal Cost, and Average Cost