Homework Answers
Since perfectly competitive firm profit-maximising condition is
P=MC
Shut-down condition is
P=MC=AVC
As it has been given that at quantity of 500 units
P=24
ATC=25.25
The condition for which this firm does not shut down but continue to produce is that the value of AVC should be less than price which is $24.
Hence option E is the correct answer.
2.
Since perfectly competitive firm profit-maximising condition is
P=MC
or P should be slightly greater than MC
Hence firm should produce 4 unit of output for maximizing profit.
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A competitive form maximizes profit at an output level of 500 units, market price is $24.00, and ATC is $25.25...
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