Question

9. Suppose a perfectly competitive firms minim un average variable costs* when it produces 50. If the price is 12 and yuma marfgenal cost is $2. the fun should? A shut down b. continue to produce, but produce. Les c. Continue to produce so do continue to operate, but produce more than 50 than 50

Answer 1

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Solution,

the correct option is c), Continue to operate 50

when firm produces 50 unit the average variable cost = $1 Price = $2 Marginal cost = $2

shut down point occurs output when the price is equal to average variable cost, so. firm will operate,

when output is 50 the average variable cost is minimum, it is production efficient position if firm produces more then the variable cost increase if produces less than the variable cost increases. firm should operate and produces 50 output.