Question

For a perfectly competitive firm, marginal revenue equals marginal cost at 250 units of output. At 250 units, price is greater than average variable cost. It necessarily follows that the a. firm should continue to produce in the short run. b. firm should shut down its operation in the short run. c. marginal cost curve must have an upward-sloping portion and a downward-sloping portion. d. firm must be earning a profit.

Answer 1

Answer:

a. firm should continue to produce in the short run.

Explanation:

If at equilibrium price is greater than average variable cost, than the firm should continue to produce in the short run. Till the point the firm is able to cover its operational/variable costs it should not shut down in the short run.

Answer 2

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