If the market price is lower than a perfectly competitive firm's average total cost,the firm will

Question

Quizplus · Accepted Answer

In a perfectly competitive market, a firm will produce as long as the market price is greater than or equal to its average variable cost. This is because the firm is able to cover its variable costs and some of its fixed costs. If the market price falls below the average variable cost, the firm will not be able to cover its variable costs and will shut down in the short run. However, if the market price is greater than or equal to the average variable cost, the firm will continue to produce and incur losses in the short run, hoping for the market price to increase in the long run. Therefore, option C is the best choice.

If the Market Price Is Lower Than a Perfectly Competitive