If the price is greater than average total cost at the profit-maximizing quantity of output in...
If the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
options: 1) continue to produce at a loss. 2) produce at a profit. 3) shut down production. 4) reduce its fixed costs.
Homework Answers
Answer
Option
2) produce at a profit
==
Profit =(P-ATC)*Q
P=price
ATC=average total cost
P>ATC then Profit >0
so the firm produces at a positive profit in the short run.
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