A perfectly competitive firm can produce its current level of output at an average total cost of $10 and a marginal cost of $8. If the market price of the product is currently $8, what should the firm do? O a. The answer depends upon the relationship between price and average variable cost. The firm should shut down if average variable cost is $8 or greater, but the firm should continue to produce the current level of output if average variable cost is less than $8. Ob. The firm should definitely shut down since average total cost exceeds price. O. The firm should continue to produce, but they should decrease production in order to increase profit. O d. The firm should increase production in order to increase profit.

A perfectly competitive firm can produce its current level of output at an average total cost of $10 and a marginal cost of $8. If the market price of the product is currently $8, what should the firm do? O a. The answer depends upon the relationship between price and average variable cost. The firm should shut down if average variable cost is $8 or greater, but the firm should continue to produce the current level of output if average variable cost is less than $8. Ob. The firm should definitely shut down since average total cost exceeds price. O. The firm should continue to produce, but they should decrease production in order to increase profit. O d. The firm should increase production in order to increase profit.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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