Suppose that marginal revenue for a perfectly competitive firm is $20 .When the firm produces 10 units,its marginal cost is $20,its average total cost is $22,and its average variable cost is $17.Then to maximize its profit in the short run,the firm

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Since the firm's marginal cost equals its marginal revenue at 10 units, it is maximizing profit by producing at this level. However, because the average total cost ($22) is higher than the price ($20, which equals marginal revenue in perfect competition), the firm incurs a loss. The loss per unit is $2 ($22 - $20), and for 10 units, this totals a $20 loss. Shutting down is not the best option because the firm's price is above its average variable cost ($17), meaning it can cover its variable costs and contribute to fixed costs, minimizing losses compared to shutting down.

Suppose That Marginal Revenue for a Perfectly Competitive Firm Is