Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm:

a) is not maximizing its profit.

b) should shut down.

c) should produce more than 500 units a day.

d) should not shut down if its total variable cost is less than $750.

Question

Business

Travis

17 October, 13:37

Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm:

a) is not maximizing its profit.

b) should shut down.

c) should produce more than 500 units a day.

d) should not shut down if its total variable cost is less than $750.

+3

Answers (1)

Know the Answer?

Darrell Stuart · Answer 1

The correct answer is d) should not shut down if its total variable cost is less than $750.

Explanation:

In the event that this value is exceeded, it would not be feasible to continue carrying out the work because they will not obtain returns in the short term and the company does not have other income that will allow it to subsist even in a perfectly competitive market.